It is only the end of March and global deal making has already reached $1.4 trillion.
That is a 103% increase on the same period last year and the fastest start in more than two decades, according to preliminary data from Dealogic, and bankers see no sign of the activity slowing down.
“We expect an uptick in M&A as financing is cheap and valuations are high. Fundamentals are better and corporate earnings are stronger as the COVID-19 vaccine is rolled out. This is all spurring confidence,” said Conor Hillery, co-head of investment banking in Europe, the Middle East and Africa at JPMorgan.
The deal making frenzy generated $30.6 billion in fees for the world’s biggest investment banks during the first three months of the year, the best-ever quarter for the sector.
“The reality is that the current level of market activity is astounding. Activity has been strong across the board,” said Javier Oficialdegui, co-head of global banking at UBS
The unprecedented boom in special-purpose acquisition companies (SPACS), which promise private companies a faster route to public markets, helped push equity capital markets (ECM) fees up by nearly 340% compared with the same period in 2020, to $13.1 billion. That is more than double the revenues in any first quarter over the past 20 years, according to Dealogic.
There have been 297 SPAC initial public offerings (IPOs) so far in 2021, worth $94.4 billion, which has already exceeded the record annual total of $83.4 billion last year. The number is so far ahead of any previous years, making comparisons with previous periods difficult, but volumes are up by over 2,200% on the same period in 2020.
Investment banks have made $4.7 billion in fees from SPACs this year, which is again far in excess of any other period.
“SPACs have been around for a long time, but what you’re seeing now is a supply of very highly-respected and proven entrepreneurs, or corporate leaders and a supply of money when interest rates are at historic lows,” said Hillery.
Wall Street has dominated the SPAC market, taking 94% of the fee pool so far this year.
However, SPACS are starting to take off in Europe. In February, a SPAC headed by former UniCredit
boss Jean Pierre Mustier, Pegasus Europe, was unveiled while German technology investor Klaus Hommels launched a SPAC through his venture-capital firm, Lakestar, which will look at buying one late-stage European tech company worth between €750 million and €4 billion.
“The IPO market has totally reopened, and all of this has been supported by a big surge in revenues from SPACs,” said Oficialdegui. “It’s very concentrated in technology and healthcare at the moment, but we see it becoming more active, particularly as more SPAC IPOs come to…