Private EquitySeptember 16 2020

Private Equity: A Summer of Merger & Acquisition Activity

2 mins read

Michael Mowlem

Managing Director, Sandaire Private Equity

The deal announced this week by Nvidia to buy ARM Holdings from Softbank for $40 billion has hit the headlines beyond the financial press, with arguments about foreign ownership of this highly successful UK tech company whose product appears in most iPhones. The M&A transaction will be the largest semiconductor transaction ever conducted and the largest M&A transaction of the year.

2020 has seen some significant deals with private equity often left in the shadow of trade buyers as well as IPOs dominating the market. With the reported $1.5 trillion of ‘dry powder’ at the disposal of private equity funds across the world, it has been trade M&A which has kept the army of bankers, accountants and lawyers across the world’s financial markets most busy, even though the overall number of deals dropped in the first half of the year.

While private equity firms might have expected to capitalise on lower public company valuations to close public-to-private transactions, the window closed quickly with the rapid recovery in equity markets. Trade buyers have been especially active with record levels of corporate cash looking for a home, lower interest rates and even banks willing to lend.

Meanwhile the strategic logic of M&A has extended beyond the aforementioned financial dynamics. The commercial rationale of corporates swallowing rivals to protect against otherwise profound changes in markets, likely in the aftermath of the Covid pandemic, has driven M&A activity, with the financial services and telecoms sectors seeing the greatest increase in deal value. More recently trade has been active in the healthcare sector with multi-billion dollar deals involving Teladoc and Siemens Healthineers. 

The summer has seen a significant step-up in activity with private equity starting to return to the market – for example an aggregate $7bn is being invested in MyHermes, Ancestry.com and Gymshark. In times of difficulty, M&A is often a driver of economic activity and it seems that now markets have adapted to the Covid environment, this period is no different.