Year-end M&A frenzy carries into Q1
Texas-based companies, private equity firms continuing heightened pace of dealmaking
Neither the COVID-19 pandemic nor the great winter storm of February 2021 slowed mergers and acquisitions for Texas-based companies and private equity firms during the first three months of the year.
New M&A data show that corporate lawyers and investment bankers in Texas continued their frenzied pace of deal activity after near record amounts of dealmaking during the final six months of 2020.
Private research firm Mergermarket
reported 291 M&A transactions during Q1 2021 with a combined value of $77.1 billion — down from the 342 deals announced during the prior quarter, which had a dollar value of $117 billion.
Technology deals accounted for 81 of transactions with a combined dollar value of $19.6 billion. Companies in the energy sector were involved in 32 deals worth $13.4 billion, according to
Mergermarket. Fifty transactions were by industrial and chemical companies with a combined price tag of $10.4 billion.
Separately, the Texas Lawbook’s Corporate Deal Tracker, which documents every transaction handled by lawyers in Texas, reported that the first week of March broke a record for the most Texas attorneys involved in M&A deals in a single week: 199 lawyers worked on 24 M&A and capital market transactions valued at $13.6 billion.
That record was shattered three weeks later when 244 Texas lawyers worked on 27 deals with a combined price tag of $13.9 billion, according to the Corporate Deal Tracker.
Keith Fullenweider, co-head of Vinson & Elkin’s corporate department, pointed to the influ
ence of special purpose acquisition companies on Q4 2020 and Q1 2021’s numbers.
“When you look at the transaction values, it’s helpful to realize that some of that might be debt-financed and some of that might be equity-financed. SPAC transactions are all equity deals, so you’ll tend to see larger dollar signs with those transactions,” said Fullenweider, who is based in Houston. “SPAC mergers have been trending towards larger transactions, if you compare them towards the middle of last year for the deal size.”
Brandon McCoy, a partner in Haynes & Boone’s mergers and acquisitions practice group in Dallas, noted the additional uncertainty around the election kept some deal flow pent up into Q4 2020, causing it to trickle into Q1 2021.
“You had a tick-up in deals in the fourth quarter, but all of those deals didn’t get done in the fourth quarter. A lot of the volume in Q1 was from some of those deals that couldn’t happen in the fourth quarter for a variety of reasons,” he said. “On the deal value side, it was more likely that the larger, more complex deals were the ones that
weren’t able to make it across the finish line.”
Mergermarket reported that there were 18 M&A deals involving Texas companies during the first three months of 2021 that had values of $1 billion or more — up from five such transactions in the first quarter of 2020.
By contrast, Texas deals of $100 million or less plummeted during the first quarter. There were 59 such transactions in Q1 2020, but only 30 this year.
Looking ahead, Texas dealmakers expect activity to continue at a steady, if not accelerated clip based on what they’re seeing.
Randy Ray, a Dallas partner in the corporate practice of Munck Wilson Mandala, said he sees M&A running at a level consistent with the past few quarters.
“I’ve got several deals that are in process or sitting in a proposed (letter of intent) stage, so there seems to be still plenty of activity out there, and I don’t see any hesitancy to move forward with it,” said Ray.
“A lot of the volume in Q1 was from some of those deals that couldn’t happen in the fourth quarter for a variety of reasons.” Brandon McCoy, a partner in Haynes & Boone’s mergers and acquisitions practice group in Dallas