2020 M&A Annual Review

In Europe, deal value rose. In Japan, outbound M&A fell, but domestic deal value increased 60%, reflecting a number of large deals. The Asia market (excluding Japan) experienced the largest overall gains, with deal value increasing 26%. Cross-border activity slumped, down 14.2% over 2019, as travel restrictions changed dealmaking logistics and countries acted to protect their borders. 3 PRIVATE EQUITY DEPLOYS CAPITAL While the private equity market experienced a short jolt early in the year, the industry posted record numbers in the second half, finishing the year with the highest annual value since the global financial crisis. 4 As we covered in last year’s Key M&A Trends alert, private equity firms entered 2020 with record levels of cash on hand, which allowed them to look for opportunities in the midst of a tumultuous market. A more detailed look at PE trends is provided in our Global PE Trends 2020 and Outlook for 2021, available here . TECH ACTIVITY RISES Technology was the winning sector for M&A activity in 2020, dominating market share as the world moved into an online environment. Globally, the Technology, Media, and Telecommunications (TMT) sector clocked $850 billion in deal value in 2020, almost twice that of the next best sector, Energy, Mining, and Utilities ($480 billion). In the U.S., Technology, the only sector to grow in value over 2019, was the most active sector, followed by Pharma, Medical, and Biotech. While 2020 proved, even more than most years, that nobody can predict the future, we expect many of 2020’s M&A trends to continue into 2021. Much attention is focused on the pandemic, including the impact of vaccines, and questions also remain about the change in the U.S. administration and other issues. But equity markets are at record levels, PE dry powder remains plentiful (even without counting the surge in SPACs, as discussed below), debt is available, and acquirors are looking to strengthen their businesses and deploy their cash. 5 Learn more about Morrison & Foerster’s Global M&A Practice . M&A DEAL TERMS EVOLVE IN RESPONSE TO THE PANDEMIC 1 As economies, businesses, and governments responded to the pandemic, buyers and sellers scrutinized existing agreements, looking to avoid the unexpected. Some pending deals, particularly those signed before or in the early days of the pandemic, headed into court; most of those settled, with deals recut or abandoned. Terms in new agreements evolved in response, with some changes likely to remain in agreements long after the pandemic recedes. Material Adverse Effect (MAE) clauses. While a buyer still must clear a high bar to show that an MAE has occurred, many sellers sought to exclude consideration of the effects of 100 200 300 400 500 US SECTOR BREAKDOWN TREND 2019 VS. 2020 DATA PROVIDED BY MERGERMARKET Technology Pharma, Medical & Biotech Deal Value (USD bn) 346.5 195.1 143.1 136.3 115.3 324.8 225.8 269.5 181.4 205.7 195.8 515.4 Financial Services Industrials & Chemicals Energy, Mining & Utilities Other MORRISON & FOERSTER 2020 M&A ANNUAL REVIEW 3