Given the caution with which investment bankers started this year and the low expectations for corporate activity, 2021 has been remarkable in terms of the speed and size of deal-making.

According to Refinitiv, the value of global mergers and acquisitions as of the start of August was $3.6 trillion, slightly more than the amount registered in the whole of last year and an all-time record.

Almost half of that total, $1.74 trillion, involved US companies as targets, the highest total in nearly 40 years. Also, there have been more $1 billion-plus deals than previously as companies bulk up in order to gain market share from one another.

As usual the technology sector has been at the forefront with roughly $800 billion in deals, while the financial sector has accounted for $442 billion of transactions.

Reasons for the upsurge in activity are threefold. First, many quoted company valuations have remain depressed following the pandemic, nowhere more so than in the UK.

Second, as Shares had highlighted well before the pandemic, private equity and buyout firms were sitting on vast sums of ‘dry powder’ or cash which they needed to deploy.

Third, and a point which had been largely overlooked but which has been a key driver of UK M&A, forthcoming changes in tax laws have made business owners accelerate their plans to sell up and make a greater effort to find buyers.

The last few weeks have seen both an increase in the size of deals in the UK and a willingness for buyers to pay a higher premium rather than risk defeat.

Cobham’s increased bid for rival defence firm Ultra Electronics (ULE) is a case in point, with the takeout price of £35 per share valuing the business at £2.57 billion or a 63% premium to the stock price the day before its initial approach in June.

In the same sector, Meggitt (MGGT) has seen its market value soar as rumours of an approach from US engineering firm Woodward at 700p in May were superceded by what was thought to be a knock-out bid from Parker-Hannifin at 800p this month.

However, just as Meggitt prepared to publish the terms of the agreed deal, it received an unsolicited approach from another US engineering firm, TransDigm, with a potential cash offer of 900p per share, valuing the business at more than £7 billion or a 90% premium to its market cap the day before the Parker Hannifin offer.

While the board of Meggitt has recommended the Parker Hannifin offer, it has opened its books to TransDigm which has until the close of business on 14 September to make a firm offer.

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