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Sponsor-driven M&A in the fast lane

Financial sponsor M&A has taken off this year, reaching its highest Q1 volume on record with $385.8bn via 779 deals, an increase of 142.9% compared with the same period in 2020. Financial sponsor entries also grew in volume by 85.8% year on year, the same with exits with a year-on-year increase of 119.4%. The high volume has been driven by a plethora of mega deals, such as Ardian and Global Infrastructure Management’s acquisition of the Water and Recycling business of Suez for $18.8bn the largest financial sponsor deal announced in 2021 so far. In total, there were 19 mega deals valued at $5bn or more announced during Q1 2021 representing total volume of $161.4bn.




Other factors behind the rise in financial sponsor volume could be the low company valuations. According to Dealogic data, the median EV/EBITDA multiple paid by bidders in transactions resulting in a change of a majority stake reached 10.72x during 2020, the lowest it has been since 2009 where the median EV/EBITDA multiple stood at just 9.45x. The impact of COVID-19 last year has caused company valuations to fall, hence this could also be one of the driving factors in the recent burst of sponsor activity, companies are cheaper to purchase.


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