Taxand Global Guide of M&A Tax 2021

If one word could be used to describe 2020, it would be “resilience.” During the course of last year, the global pandemic – COVID-19 – and global responses to it brought the global economy to its knees while slowing deal activity to a crawl during the second quarter. 2020 also provided the backdrop for one of the most tumultuous US election seasons in over 100 years, leaving global markets with a level of uncertainty not seen since the financial crisis. The past year also left the markets wondering whether a trade deal would ever be struck between the UK and the European Commission as the Brexit deadline loomed. US bankruptcy filings in 2020 by companies with more than $50 million of liabilities totaled greater than 225 as of the end of November, the most such filings on a comparable period basis since 2009, according to Bloomberg data. As if the foregoing was not enough, the S&P 500 fell by roughly 8.5 percent in February and another 12.5 percent in March. Daily swings of 2,000 points were not uncommon, and the S&P 500 fluctuated by at least 1 percent on twice as many days in 2020 than it did, on average, in any year since 1950.

Despite all of this chaos, 2020 demonstrated remarkable resilience, ending the year with global M&A activity at the $3.6 trillion level, according to Refinitiv data—a mere five percent decline versus 2019. Companies signed close to $2.3 trillion worth of transactions in the last half of the calendar year—an 88 percent increase versus the year’s first half. Deal activity in each of the third and fourth quarters of the year eclipsed $1 trillion, making it only the second time since 2008 in which transactions exceeded that level in back-to-back quarters. In fact, per Bloomberg data, roughly 2,500 transactions were announced globally in the last two weeks of 2020, the most on record for that time period. Clearly, the flurry of activity over the holidays leading up to the year-end was the crescendo of the momentum that started back in the third quarter, demonstrating the demand for deals that built up from the first half of the year and, perhaps, a confidence that the worst was over and uncertainty dissipating in light of news of the developed COVID-19 vaccinations.

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