Dive Brief:

• Global dealmaking during the first three months of 2021 boosted the stock prices of acquiring companies 13.8 percentage points above the return of the MSCI World Index, a bigger increase than in any first quarter since 2011, Willis Towers Watson research found.

• The number of deals worldwide valued at more than $100 million rose to 206 during the first quarter, a 21% increase compared with the first three months of 2020, WTW said. 

• North America recorded the most transactions during the first quarter, with volumes rising 33% compared with the first three months of 2020 in the second-strongest start to a year on record, Willis Towers Watson said.

Dive Insight:

Rock-bottom interest rates, a stock market boom, ample ready cash and record fiscal stimulus in the U.S. will probably continue fueling dealmaking throughout 2021, according to Duncan Smithson, senior director for mergers and acquisitions at Willis Towers Watson.

The pandemic has pushed down the share prices of firms most disrupted by the recession and lockdowns, making them more attractive for acquisition than before the onset of COVID-19, he said.

“Since the first half of 2020, when the spread of COVID-19 led to many deals being delayed, confidence has returned allied with a more pragmatic and strategic focus on owning the right portfolio of assets for the long run,” Smithson said in a statement.

A shrinking pool of acquisition targets may compel buyers to pick up the pace of dealmaking, he said. “With financial conditions still uncertain, dealmakers will need to resist the temptation to cut corners on due diligence and take the time to review their targets and understand which levers to pull to maximize growth.”

M&A activity will probably be robust among several sectors, including technology, pharmaceuticals, health care, industrials, financial services, and energy and power, Smithson said.

Dealmakers face headwinds such as the growing rivalry between the U.S. and China, the uncertain impact of Brexit on financial services and persistent tensions in the Middle East, he said.