Dealmaking came roaring back in the first quarter, climbing to a record $1.1 trillion as big acquirers moved past the pandemic slowdown and blank-check companies snapped up targets.

It’s the best start of the year since at least 1998, according to data compiled by Bloomberg.

Mergers and acquisitions soared in every region, with North America acquirers leading the way with $644 billion of transactions. Deals by European buyers rose 41% to $286 billion, while companies in Asia Pacific spent $261 billion.

“I haven’t seen these levels of activity for a long time and I don’t see a meaningful slowdown any time soon,” said Alison Harding-Jones, head of M&A for Europe, Middle East and Africa at Citigroup Inc. “Stocks are highly valued, financing markets are supportive and there’s money coming in from a number of places.”

After the Covid-19 lockdowns grounded deal advisers and threatened revenue across industries last year, optimism about vaccine programs and economic growth are driving the 2021 boom, dealmakers said. The busy first quarter built on a rebound in M&A that started toward the end of last year.

“Confidence is what drives M&A deals even when the markets may be overvalued,” said Scott Barshay, chair of the corporate department at law firm Paul, Weiss, Rifkind, Wharton & Garrison.

Barshay singled out industrials companies, which have announced the year’s biggest deals, as being particularly active compared with 2020 as furloughs and supply-chain challenges ease up. There’s also optimism in that sector that “everyone will be back to work in a normalized way by the end of the year, and they will be helped by the fiscal stimulus,” he added.

AerCap Holdings NV’s $30 billion acquisition of General Electric Co.’s jet-leasing business was the biggest deal of the quarter, followed by Canadian Pacific Railway Ltd.’s purchase of Kansas City Southern for $25 billion.

What’s missing? Mega, megadeals—the $50 billion-plus behemoths that shake up industries and attract extra scrutiny from regulators. There have been no transactions above that mark since mid-2019, the data show, when AbbVie Inc. agreed to acquire botox maker Allergan Plc for about $63 billion. That’s not necessarily a bad thing, bankers said.

“The number of deals and the flow are a sign of a healthier M&A market, rather than just a few big deals here or there that are skewing the numbers,” said Steven Baronoff, chairman of global M&A at Bank of America Corp.

SPAC Effect
Meanwhile, SPACs—or special purpose acquisition companies—are playing an outsize role in dealmaking. The blank-check vehicles, which raised $85 billion through initial public offerings in 2020 and another $99 billion this year, have now started putting that money to use.

Deals in which public companies bought private businesses made up $435 billion of the first quarter’s activity, the data show, though that number is likely much higher as financial terms of such transactions aren’t always disclosed. That’s 86% higher than a year ago, and could be partly due to the boom in blank-check M&A.

Boom Time
The biggest SPAC deal of the quarter was Churchill Capital Corp. IV’s acquisition of electric-vehicle startup Lucid Motors Inc., which will list at a pro- forma equity value of $24 billion. Given that SPACs usually find a deal worth about five times their equity capital, according to Goldman Sachs Group Inc. strategists, vehicles that have raised money this year alone could be looking for as much as $500 billion in transactions.

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