6 Important M&A Trends (2021-2024)

by Josh Howarth - August 24, 2021

Mergers and acquisitions are integral to the development and growth of the global economy.

M&As allow businesses to acquire new technology, make strategic transitions, and offer exits for investors.

Read on to learn about the most important trends influencing the world of M&A.

1. Megadeals Are on The Rise

Megadeals are M&A transactions valued at over $10 billion.

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Searches for “Megadeals” have grown by 800% over the last 15 years.

The global value of deals in the first half of 2021 was extremely high.

In the first half of 2021, there were 13,130 M&A transactions, with a value of around $2.6 trillion.

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Global deal volume and value per quarter since 2019.

To put the size of the deals into perspective, just look at the first half of 2020.

There were more global deals overall in 2020 (13,275).

But the total value ($921 billion) was around a third of the deals announced in the first half of 2021.

In fact, the first half of 2021’s total deal value was higher than any other first quarter on record (going back to 2006 in their database).

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Total deal value by quarter, going back to 2006.

According to Barron’s, there have been 26 of these transactions announced in the first half of 2021. The total value of these deals was $671 billion.

The U.S. claims 15 of these deals and $432.5 billion (about 64%) of the value.

And just like the rest of the world, the U.S. has seen a smaller number of overall deals (down 5% compared to the first half of 2020).

However, the total value of deals in the U.S. grew to $1.29 trillion in the first half of 2021. This is compared to just $316.7 billion in deal value in the first half of 2020.

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Four of the five largest deals in the first half of 2021 took place in the U.S.

White & Case reports that the technology, media, and telecommunications (TMT) sector was the largest global source of deals by sector.

As the technology sector continues to grow and expand to pretty much every other sector, global M&A mega deals may increase substantially.

2. Private Equity Increases Its Share of Global M&A

Over the past few decades, private equity (PE) has been taking a larger and larger share of the M&A market.

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Searches for Private Equity over the last 5 years.

According to the Financial Times, private equity had its biggest first half in 2021 since 1980.

There were 6,298 PE-backed transactions announced in the first half of 2021 worth about $513 billion.

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The total value of deals in the first half of 2021 surpasses every other past year by a wide margin.

And it looks like this isn’t going to slow down any time soon.

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Global PE dry powder has been growing for years, driven by increased growth in the Asian Pacific.

It’s estimated that 2021 has already added an extra trillion to PE dry powder, bringing the total to $3 trillion in just the first half of the year.

U.S. PE dry powder sits at roughly $150 billion as of mid-year 2021.

The Blackstone Group is the world’s largest private equity firm based on assets under management.

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Search interest in The Blackstone Group has increased by 385% over the last five years.

As of July 2021, Blackstone reported $223.6 billion in private equity AUM. This is 21% higher than 2020’s mid-year number.

Bain Capital – another large U.S. PE firm – has shifted its focus to the early-stage startups

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Searches for Bain Capital Private Equity over the last 5 years.

It started Bain Capital Ventures back in 2001 but has recently ramped up its AUM in 2021. It raised $1.3 billion in the first half of 2021, bringing its AUM to $6.7 billion.

3. Industry Rollups Offer New Ways for Acquirers to Create Value

One M&A strategy that has become popular in recent years is the industry rollup.

The process typically involves one holding company that goes on an acquisition spree, buying up several different companies in the same industry.

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How a rollup acquisition strategy works.

Rollups allow a holding company to combine resources and share operating costs required to run multiple companies in the same industry.

Industry roll-ups are especially prevalent in lower and middle-market M&A activity.

Although there were some mega-deals announced in the last several years, 68.7% of all transactions were under $100 million in 2020.

In a market like this, industry roll-ups are a major way for acquirers to add value. They can create economies of scale and value the whole greater than the sum of the parts.

It’s no surprise then that 62% of PE firms that are actively looking to acquire in 2021 said they are pursuing a rollup strategy.

Because of this, rollups are on the rise in the fragmented eCommerce industry.

Thrasio, a company founded in 2018, has sought to consolidate the eCommerce market.

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Searches for Thrasio Holdings, Inc. were up by 7200% over the last two years.

In just two years, Thrasio has acquired more than 125 Amazon brands.

And in 2020 Thrasio was the fastest company to ever reach a valuation of $1 billion.

This has kicked off a trend in the Amazon third-party seller market.

Close to a billion dollars was raised by firms and funds looking to acquire Amazon eCommerce brands in 2020. And $2.5 billion was raised in just the first four months of 2021 to acquire Amazon brands.

One of the other largest companies executing this strategy is The Hut Group.

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Searches for The Hut Group have grown by 4200% over the last 15 years.

The Hut Group was founded back in 2004 in Manchester, England.

Since then it has acquired multiple eCommerce brands (mostly in the health and beauty sector.)

The Hut Group now has 300 websites through which it sells direct-to-consumer products.

As eCommerce rollups became more popular in 2020, The Hut Group went public at a $7 billion valuationthe largest IPO in the UK since 2015.

And this trend should only increase as the Amazon third-party seller market grows.

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Search interest in “Amazon third party” has grown by 362% over the last 10 years.

In 2020, Amazon third-party sales increased by 47.5%.

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Third-party sellers drove most of Amazon’s gross merchandise volume (GMV) growth in 2020.

In 2020, Amazon third-party sellers’ share of total Amazon GMV increased to 62%, up from about 50% five years ago in 2015.

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Amazon third-party sellers’ share of Amazon GMV has increased from 3% in 1999 to 62% by the end of 2020.

And Amazon third-party sales in the first half of 2021 increased by about 50% compared to the first half of 2020.

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Amazon third-party sales per quarter.

4. Venture-Backed Companies are Increasingly Driven by M&A

The venture capital market is currently experiencing more M&A activity than ever before.

Acquisitions by large tech companies are becoming a major way for venture capitalists and other investors to exit their positions in startups.

And VC-backed companies are buying other VC-backed companies at an unprecedented rate.

In 2020, there were more than 1500 venture-backed private companies that were acquired by 1300 acquirers. The total deal value was just under $150 billion.

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Total VC-backed M&A deal value and the number of deals per quarter.

The majority of this $150 billion in transaction value came from just a few transactions.

In 2020, there were 41 of these companies that were acquired for $1 billion or moretotaling $104 billion in deal value(roughly 70% of total VC-backed deals).

Tech giants Apple, Microsoft, and Cisco were responsible for a large chunk of these acquisitions.

According to Apple CEO Tim Cook, the company has acquired more than 100 companies over the last six years.

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List of Apple’s largest acquisitions.

Microsoft acquired 13 companies in 2013, 8 in 2020, and has already acquired 8 so far in 2021.

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Searches for MSFT – Microsoft’s stock ticker – in the last 3 months.

According to Crunchbase, Microsoft has acquired a whopping 243 companies since its inception.

And Cisco has completed 236 acquisitions since it was started in 1984.

Additionally, Cisco has made several acquisitions of successful startups such as Epsagon and Socio.

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Searches for Epsagon Ltd. have grown by 7400% over the last decade.

In addition to large corporations, 2021 has seen a record number of VC-backed firms being acquired by other VC-backed firms.

Over half of the venture-backed acquisitions by private acquirers in the first half of 2021 were made by other venture-backed companies.

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Acquisitions of VC-backed startups by other VC-backed startups were the highest on record in 2021.

If you’re skeptical about the growing role of M&A in the startup landscape, just ask MicroAcquire.

Its founder, Andrew Gazdecki, said the platform is seeing about 300-400 new acquirers join the platform every day.

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Search interest in MicroAcquire has grown by 8500% over the last two years.

MicroAcquire is a marketplace for startup acquisitions. It has more than 30,000 buyers on the platform and has raised more than $6.3 million as of 2021.

Private equity is also dipping its toe into the startup market.

About 20% of venture-backed companies were bought by a private equity firm in 2020, compared to just over 2% 20 years ago.

And traditional PE firms like Bain Capital have injected more and more money into funds focused on early-stage companies.

This plays into a growing trend known as “corporate venture capital”.

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Searches for Corporate Venture Capital over the last 5 years.

Instead of engaging in a strategic merger or acquisition, a corporation typically develops an arm of the company that engages in VC-like activities.

This may involve participating in funding rounds, joint ventures with startups, and entire acquisitions of smaller start-ups.

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Corporate VC deal value rose to a record $95 billion in 2020. Technology and healthcare led the way, taking in $60 billion in corporate venture capital.

Plug and Play say the total value of deals is even higher, placing it at $120 billion for 2020.

5. Borders Are Becoming Irrelevant to M&A Activity

As the global economy becomes more connected, cross-border M&A is becoming a larger part of business around the world.

Cross-border M&A is somewhat cyclical but has risen quite a lot over the last 35 years.

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Cross-border M&A has risen from a few hundred deals in 1985 to about 13,900 in 2019.

The global pandemic in 2020 put a slight damper on cross-border deals, but volume rebounded in 2021.

Cross-border deal volume in the first quarter of 2021 grew by 78% compared to the first quarter of 2020.

There were 922 deals in Q1 2021 valued at a total of $358.1 billion.

In fact, the first quarter’s cross-border volume made up over 40% of all global M&A transactions.

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Canada was the largest acquirer of U.S. companies in the first quarter – completing deals worth $37.3 billion.

6. Governments Increase Scrutiny of Deals

As deal sizes and total value explodes, many expect the government to begin cracking down on large deals and industry consolidation.

In July of 2021, President Biden signed an executive order into action that urged the Federal Trade Commission (FTC) to address prior “bad mergers” allowed under previous administrations, among other things.

In addition, Lina Kahn was appointed head of the FTC this year. She has already reportedly pledged to block more mergers that the FTC believes violate antitrust laws.

The FTC undertook more enforcement actions in 2020 than it has in any other year since 2001.

In 2020, the Department of Justice’s Antitrust department sued to block Visa’s attempted $5.3 billion acquisition of payment technology company Plaid – causing the two to abandon the deal in January of 2021.

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Search interest in Plaid has grown by 966% over the last decade.

In addition, the FTC has filed actions to block five major hospital acquisitions in 2021.

In 2021, the U.S. Justice Department sued to block a massive $30 billion merger between two of the “big three” insurance brokers – Aon and Willis Towers Watson.

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Searches for Aon over the last three months.

And it’s not just the U.S. government either.

The European Commission recently expanded its jurisdiction when reviewing cross-border deals in the EU.

And in August the Commission announced that it was reviewing a small $1 billion deal between two U.S. companies – Facebook and the startup Kustomer.

In January of 2020, the UK government enhanced its ability to intervene in mergers based on a public policy basis.

As more M&A activity goes on and more industries consolidate, expect more antitrust enforcement to disrupt the hot merger market.

Conclusion

That’s all for the top mergers and acquisitions trends worth tracking over the 2-3 years.

Overall, the level of M&A activity is on an uptick across every industry and around the globe. The value of the deals is becoming larger, and the antitrust scrutiny is becoming stronger.

As these trends progress, the outcomes will likely get more surprising.

Written By
Josh Howarth
Co-founder of Exploding Topics.
548 Market St. Suite 95149
San Francisco, California
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