Big, Bold, Strategic Moves: The 2021 M&A Outlook

Episode Summary

Executive Summary: Goldman Sachs M&A co-heads say the 2020 rebound in dealmaking was dramatic and that momentum is continuing into 2021, driven by strong capital markets, high stock prices, ample private capital, and growing confidence that the pandemic’s worst effects will fade. They expect more large, bold, and sometimes cross-border transactions, while virtual deal processes are likely to remain partly permanent.

Main Topics: 2020 M&A rebound and record activity (Priority: 5/5): The speakers describe 2020 as a tale of two halves: a weak first half followed by a powerful second-half rebound that made late 2020 the most active M&A period on record. Virtual dealmaking and process innovation (Priority: 4/5): They explain how pandemic-era deal execution moved online, increasing efficiency and likely leaving a lasting imprint on management meetings, site visits, and client interaction. Outlook for 2021 M&A activity (Priority: 5/5): Both executives expect continued strength through 2021, citing vaccine progress, a recovering economy, and strong strategic dialogue among corporate and private-capital clients. Drivers of strategic and bold dealmaking (Priority: 5/5): Open capital markets, abundant liquidity, strong equity financing conditions, and board/investor pressure for growth are pushing companies toward larger and more ambitious transactions. Role of sponsors, private equity, and capital pools (Priority: 4/5): Private equity and other capital providers are seen as major forces because of large dry powder, willingness to write big checks, and flexibility in transaction structure. SPACs as an alternative path, not the main driver (Priority: 3/5): SPACs are described as highly relevant to both IPOs and M&A, but more as an alternative route for public listing than a primary cause of the M&A rebound. Return of large-ticket and cross-border M&A (Priority: 5/5): The executives expect more $10 billion-plus deals and a revival of cross-border transactions as globalization and international regulatory considerations reassert themselves.

Key Arguments: The M&A market in late 2020 was exceptionally active, with second-half activity doubling the first half as companies re-engaged after the initial pandemic shock. Virtual processes worked better than expected, improving management time efficiency and reducing travel without derailing complex transactions. Client confidence is improving because vaccines suggest the worst of the pandemic may be over in the second half of 2021. Capital is widely available on both debt and equity sides, unlike during the financial crisis, making large deals easier to finance. Boards and investors are encouraging management teams to pursue strategic repositioning and growth. Private equity and other private capital pools are increasingly bold, enabling larger and more complex transactions. SPACs matter as a financing/listing alternative, but corporate strategy remains the primary driver of M&A activity. Cross-border M&A should recover as global business becomes more international and companies look beyond domestic markets. Large transactions are increasing because stock prices are strong and financing conditions support bigger check sizes.

Data Points: Global M&A activity in late 2020: almost $1.8 trillion - Stefan described September 1 through year-end 2020 as the most active M&A market in history. Late-2020 vs first-half activity: effectively double - Late 2020 M&A volume was roughly twice the first half of the year. Transactions announced virtually since Q2 2020 worst phase: over 100 - Mark said the firm announced more than 100 transactions during the worst phase of the pandemic, most fully virtual. Year-to-date 2021 M&A activity: double again vs first half of last year - Stefan said 2021 started at roughly twice the pace of the pre-pandemic first half of 2020. $10 billion-plus deals: increasing rapidly - Both speakers said very large transactions are returning and expected to continue increasing. Recording date: Wednesday, January 27, 2021 - Podcast date noted at the end of the episode.

Pivotal Quotes: "it was the most active M&A market in history with almost 1.8 trillion in activity" — Stefan Feldgois: He summarized the record late-2020 rebound in global M&A. "we've announced over 100 transactions, a significant majority of which were completed fully virtually" — Mark Sorell: He described how deal execution adapted during the pandemic. "we believe that conditions are conducive to big, bold moves" — Mark Sorell: He explained why large transactions are expected to continue.

Implications: M&A appears set for continued strength, especially in large, strategically motivated deals. Firms should expect more virtual elements to persist, while sponsors, corporates, and advisers prepare for rising cross-border activity and a competitive financing environment.