According to KPMG, business activity around the world could reach a record $6 trillion by the end of the year as companies continue to recover from cheap funding and the pandemic.
According to Refinitiv data, global mergers and acquisitions have exceeded $4.3 trillion so far this year, reaching an all-time high of $4.8 trillion in 2015.
Steven Bates, partner at KPMG and head of transactions in Singapore, said there was no sign of “stored energy” from funding before the pandemic as it was still in full swing. Slow down.
“Currently, the M&A market is completely supercharged,” Bates told CNBC’s “Street Science Asia” on Friday.
“There’s a lot of stored energy from funding [in 2018 and 2019] This did not happen last year. Dry powder is being applied at present. “
Companies leading private equity and SPAC
The technology, financial services, industry and energy sectors accounted for the majority of transactions this year, led primarily by businesses, private equity funds, SPACs or special purpose companies.
The growing popularity of SPAC is non-commercial and has been established solely to raise funds from investors for the purpose of acquiring one or more businesses. They raise money through an initial public offering and use the cash to merge with a private sector company and take it public.
According to Bates, the United States still accounts for the majority of transactions, but Europe posted the fastest year-on-year growth of 50%. Meanwhile, Asia grew 20% year-on-year.
The growth in trading is supported by low interest rates and steady growth during the coronavirus pandemic. This has prompted companies to look for alternative sources of growth. In fact, according to a September KPMG survey, eight out of ten CEOs (86%) say that inorganic means will be the main source of growth in the next three years. Examples of inorganic growth include mergers and acquisitions, joint ventures and strategic alliances.
“We’re in a fairly low growth environment, which means CEOs are looking to other markets to develop their products, markets, and capabilities,” Bates says.
According to Bates, this trend is expected to continue until the end of the year, when transactions could reach “around $6 trillion”, and perhaps as early as 2022.
“Interest rates remain low and the positive sentiment still remains… momentum I think. [will] continue. I think we’ll see that in the first quarter of next year,” Bates said.