Covid-19 Impact on the M&A business ?
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Despite the fact that most businesses have suffered financially, what do you believe has changed in the M&A business and corporates has to consider in order to have a successful merger or acquisition?
Through my experience, I have observed that M&A cross border appetite has been stifled due to Covid-19 restricting travel, making it difficult to carry out site visits and physical due diligence. While virtual meetings can definitely be held, this has created lengthy DD processes and even caused some deals to be put on hold
I strongly believe COVID had a huge impact on the M&A transactions. There is a strong information asymmetry, not all parties have the same amount of information. To add, some could argue that there was a significant discount in stock prices and huge opportunity to acquire companies with a good deal.
It has given the world different perspective on technology and forced old companies to digital transformation and the fastest way to do that was through M&A.
It made both seller and buyer have to build more trust relationship through out the entire transaction process, much more rely on various digital communication tools in different countries such as Wechat, Line, Viber etc., need more creative thinking/ way of working such as outsource integration activities to professional local advisers.
The interesting analysis provided by BCG: https://www.bcg.com/publications/2021/navigating-competitive-software-mergers-acquisitions-market
The Software M&A market was growing during Covid and 2/3 of the buyers were non-technology companies and financial buyers.I do believe Covid-19 had an impact on the M&A business. Understandably, deal value and volume fell precipitously in the aftermath of COVID-19.
I think covid will have an impact on M & A activities. Biggest concern I would have is inflated short term financials for those organizations that had the opportunity to take advantage of corvid related necessities. Increased income would potentially inflate values. Opposite is can also be true – reduced sales/revenue will negatively affect market value and potentially affect a acquisition.
I think the primary impact COVID-19 has had on the M&A business is the impact to the macro economic environment. Massive government stimulus inflated the price for practically every industry, and may have resulted in overinflated prices (e.g. Block purchasing Afterpay for $29 billion). Now that prices have fallen across every major stock index, M&A activity may pick up for strong companies looking to make acquisitions at more palatable prices.
The complexity around building relationships, driving cultural synergies and effective communication have been hard. Now with the new hybrid environment, this has to have increased the complexity and risk!
Very dependent upon the industry as certain industries have improved financial performance as a result of covid-19
COVID-19 may have had huge impacts on risk appetites and company values initially, since COVID-19 was an unexpected spanner in the works. However, I think COVID-19 has helped accelerate the M&A business to a certain extent, particularly due to the fiscal and monetary strategies employed by some governments. Nonetheless, combined with rising costs, inflationary pressures and supply shocks, different industries and the reactions from each industry has certainly affected the composition of M&A activity by industries.
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