Global mergers and acquisitions (M&A) activity hit an all-time high in the first six months of 2021, with deals worth more than US$2.6 trillion, up from US$926bn year-on-year and surging past the pre-pandemic five-year average (H1 2015-2019) of US$1.6 trillion, according to new analysis by EY.

More than half of the activity was recorded in North America, which saw deals worth US$1.4 trillion (up from US$345bn in H1 2020) - almost double the average seen in the five years prior to the pandemic (US$784bn). North America was followed by the Asia-Pacific region, which saw M&A values of US$446bn, a jump from US$222bn in H1 2020 and an increase from an average of US$317bn in H1 2015-2019. Europe follows, recording US$412bn, up from US$245bn in H1 2020 and exceeding the H1 2015-2019 average of US$356bn.

Despite a fall in the total number of deals announced, a spike in billion-dollar deals is the key driver behind activity so far this year according to the analysis, with 479 such deals announced. Despite many parts of the world economy still operating under restrictions, cross-border transactions have also staged an impressive comeback, increasing to US$688bn from US$236bn in H1 2020 and above the average of US$480 recorded in the five years prior to the COVID-19 pandemic.

Optimism drives activity in North America and Europe, domestic deals power M&A in China

M&A activity, despite the strong headline figure, is not evenly spread across the globe. When it comes to outbound and inbound transactions, North America and Europe are the main centres of activity.

The US tops the list of countries with the highest outbound transactions value, having recorded US$221bn in deals, up from US$77bn in H1 2020 and more than double the average seen between H1 2015-19 (US$92bn). Recording US$58bn (up from US$14bn in H1 2020), Canada comes in second, while The Netherlands and Ireland emerge as outbound M&A front-runners with US$53bn from an average of US$21bn between H1 2015-19 and US$51bn from an average of US$4.3bn respectively.

At the same time, the US and the UK are emerging as the most attractive destinations for inbound M&A. The US has recorded an increase in the value of inbound transactions by over 250% compared with H1 2020 (to US$200bn), and 60% compared with the H1 average (US$125bn) of the five years prior to the pandemic. And the UK has seen an increase of 51% (to US$87bn) compared to H1 2020 - exceeding the inbound average between H1 2015-2019 (US$80bn).

Meanwhile, domestic dealmaking in China is running at record pace with M&A value so far this year totaling US$197bn - eight times more than foreign-invested M&A deals and a 20% increase on the average domestic transactions value of the five pre-pandemic years (US$164bn).

New media landscape and ESG-related acquisitions drive sector activity

While technology-related transactions are leading the way with an increase in value of more than 161% (to US$783bn) compared with the pre-pandemic average, the media and entertainment sector has seen some of the largest deals in 2021 - as streaming giants look to attract and retain customers. The sector has already recorded an impressive US$157bn worth of deals (up from US$16bn in H1 2020) and more than double the average of the five pre-pandemic years (US$71bn).

In addition, M&A into the renewables sector has almost tripled compared with H1 2020 as CEOs look to use transactions to meet ambitious environmental targets. The value of these environmental, social and governance (ESG) -related transactions has jumped from US$35.7bn in H1 2020 to US$96.5bn in H1 2021.