JETRO Invest Japan Report 2021
Chapter1. Macroeconomic and Inward/Outward Foreign Direct Investment Trends in the World and Japan
Section2. FDI Trends in the World and Japan
Global Trends in Inward FDI part2

Global M&A deals declined both in number and value

According to the Workspace(Refinitiv), in 2020, cross-border mergers and acquisitions (hereafter, M&A) declined for the second consecutive year following 2019, both in number and value. The number of deals fell 15.3% to 10,070 and the value decreased 10.6% to 969 billion dollars.(Chart 1-11) (Chart 1-12).

Chart 1-11: Number of M&A Deals in the World
The number of M&A deals in the world was 11,755 in 2008, decreased 29.1% year-on-year to 8,335 in 2009, increased 21.8% year-on-year to 10,154 in 2010, increased 6.7% year-on-year to 10,835 in 2011, decreased 7.6% year-on-year to 10,015 in 2012, decreased 9.8% year-on-year to 9,037 in 2013, increased 12.9% year-on-year to 10,199 in 2014, increased 0.5% year-on-year to 11,265 in 2015, increased 3.4% year-on-year to 11,650 in 2016, increased 5.4% year-on-year to 12,274 in 2017, increased 1.8% year-on-year to 12,499 in 2018, decreased 4.8% year-on-year to 11,896 in 2019, and decreased 15.3% year-on-year to 10,070 in 2020. 8,099 in January-August 2019, 6,311 in the same period of 2020, and 8,810 in the same period of 2021.

Source:  "Workspace"(Refinitiv)(as of Oct.11th, 2021)

Chart 1-12: Values of M&A Deals in the World
Values of M&A Deals in the World: 1,250.998 billion dollars in 2008, decreased 55.9% year-on-year to 551.471 billion dollars in 2009, increased 26.8% year-on-year to 699.013 billion dollars in 2010, decreased 39.6% year-on-year to 975.12 billion dollars in 2011, decreased 25.6% year-on-year to 725.084 billion dollars in 2012, decreased 6.0% year-on-year to 681.284 billion dollars in 2013, increased 34.3% year-on-year to 914.709 billion dollars in 2014, increased 22.4% year-on-year to 1,119.348 billion dollars in 2015, increased 12.6% year-on-year to 1,260.509 billion dollars in 2016, decreased 10.3% year-on-year to 1,130.898 billion dollars in 2017, increased 15.3% year-on-year to 1,303.525 billion dollars in 2018, decreased 16.9% year-on-year to 1,835.553 billion dollars in 2019, and decreased 10.6% year-on-year to 968.58 billion dollars in 2020. 746.711 billion dollars in January-August 2019, 606.582 billion dollars in the same period of 2020, and 980.191 billion dollars in the same period of 2021.

Source: "Workspace"(Refinitiv)(as of Oct.11th, 2021)

Looking at the monthly trends of M&A deals in 2020, there were 1,055 deals in January, about the same as in any other usual month (900 to 1100 deals). Then the monthly number dropped to 800s in February (822) and March (818), and further to 600s in April (669) and May (681), when the COVID-19 pandemic spread globally. Thereafter, the number gradually recovered, increasing to 950 in October and 1,067 in December. In 2021, the number of M&A deals has been robust; in the January-August period, the number of M&A deals was 39.6% higher than in the same period of the previous year.

Looking at global M&A activity in 2020 by acquirer country and region, the U.S. accounted for the largest number at 2,187 (down 4.6% from the previous year), followed by the U.K. (1,051, down 12.1%), Canada (547, down 6.5%), Germany (490, down 22.5%), and France (479, down 28.6%) (Chart 1-13).

Chart 1-13: Number of Global M&A Deals by Acquirer Country and Region (# of Projects, %)
Ranking Country/Region Change in
Ranking
# of Projects YoY Share
1 US No change 2,187 -4.6 21.7
2 UK No change 1,051 -12.1 10.4
3 Canada Rank up 547 -6.5 5.4
4 Germany No change 490 -22.5 4.9
5 France Rank down 479 -28.6 4.8
6 Japan No change 376 -25.7 3.7
Total 11,896 -15.3 100

The number of deals by the top five countries, which accounted for about half of the total, were all down from the previous year.

On a value basis, the U.S. accounted for the largest amount at $246 billion, up 19.2% from the previous year, followed by the U.K. ($186 billion, up 43.0%), Germany ($48 billion, down 0.3%), and Japan ($48 billion, down 65.3%).

The U.S. and U.K. saw year-on-year increases (Chart 1-14). UNCTAD analyzes and attributes the year-on-year decline of Japan's M&A, both in the number and value, to the absence of large-scale deals in 2020, which had been observable in recent years.

Chart 1-14: Values of Global M&A Deals by Acquisition Country and Region (Billion dollars %)
Ranking Country/Region Change in
Ranking
Value YoY Share
1 US No change 246 19.2 25.4
2 UK Rank up 186 43.0 19.2
3 Germany Rank up 48 -0.3 5.0
4 Japan Rank down 48 -65.3 4.9
5 China Rank up 37 -0.7 3.8
Total 969 -10.6 100.0

Looking at the acquisition target by countries and regions, the U.S. recorded the largest number with 1,686 deals, up 0.0% from the previous year, followed by the U.K. (941 deals, down 10.6%), and Germany (523 deals, down 25.3%) (Chart 1-15). While the overall number fell 15.3%, those in in the top countries, including the U.S. and Canada, were almost unchanged.

Chart 1-15: Number of Global M&A Deals by Target Country and Region (# of of Projects, %)
Ranking Country/Region Change in
Ranking
# of Projects YoY Share
1 US No change 1,686 0.0 16.7
2 UK No change 941 -10.6 9.3
3 Germany No change 523 -25.3 5.2
4 Canada No change 512 -1.0 5.1
5 France No change 415 -18.3 4.1
20 Japan Rank down 135 11.6 1.3
Total 10,070 -15.3 100.0

Looking at the value, the U.S. registered 249 billion dollars, down 11.1% from the previous year. As with the number of deals, the U.S. recorded the highest figure amount all countries and regions. However, the amount declined year on year.. The Netherlands (136 billion dollars, up 442.2%), and the U.K. (74 billion dollars, down 16.8%) followed (Chart 1-16).

Chart 1-16: Values of Global M&A Deals by Target Country and Region (Billion dollars %)
Ranking Country/Region Change in
Ranking
Value YoY Share
1 US No change 249 -11.1 25.7
2 Netherlands Rank down 136 442.2 14.0
3 UK Rank down 74 -16.8 7.6
4 Germany No change 66 10.9 6.8
5 India Rank down 40 43.6 4.1
21 Japan Rank down 10 19.8 1.0
Total 969 -10.6 100.0

Growth forecasted for 2021, with uneven recovery across regions

UNCTAD projects global inward FDI in 2021 to increase by 10 to 15% from 2020 (Chart 1-17). While the number of greenfield investments has been sluggish, M&A has been active since the second half of 2020, and this trend continues in 2021. In addition to the Asian region, where investments were solid in 2020, UNCTAD expects investments in infrastructure, digital technologies, and environment, funded by the fiscal policies launched by the EU countries and the U.S. to respond to the economic impact of COVID-19, will contribute to increasing inward FDI.

Chart 1-17: FDI Growth Rate for 2021 (Forecast)
FDI Growth Rate for 2021 (Forecast) is: +10 to 15% overall; +15 to 20% in developed economies; +15 to 20% in Europe; +10 to 20% in North America; +5 to 10% in developing economies; 0 to +10% in Africa; +5 to 10% in Asia; and -5 to +5% in Latin America.

Note: Classification of each region is as defined by UNCTAD.
Source: "World Investment Report 2021" (UNCTAD)

On the other hand, UNCTAD predicts that the recovery of inward FDI will be weak in Latin American and African countries, which will continue to be significantly affected by COVID-19. There are concerns that the impact of COVID-19 variants on the world's social and economic conditions in various parts of the world may affect the forecast of global Inward FDI.

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