This topic contains 15 replies, has 16 voices, and was last updated by 1 month ago.
February 6, 2021 at 8:18 pm #116896
The Covid crisis is causing an unprecedented economic recession but the stock market is currently at its highest level. Will this increase or decrease the number of transactions in the coming years? Your opinion?February 7, 2021 at 4:05 am #116898
This in my mind will depend on the sector and industry to some extent and the impact of Covid on that industry. Some industries are more affected than others.
As an example talking about the Banking sector in the US, Volume of deals is likely to drop for some time due to COVID-19, flat interest rates etc. until things improve but poorer valuations, liquidity shocks, and a new wave of non-performing loans and related provisions worsening capital strength of the banking sector, could accelerate the domestic consolidation trend where troubled banks may look for rescue, restructurings and nationalizations deals as governments/central banks inject liquidity. Moreover, banks with high exposure to stressed industries (hotels, restaurants, travel, oil & gas, etc.) are likely to face an increase in NPLs and a worsening of the asset quality. This could serve as a potential opportunity for asset management companies and PE investors who may see this as a good entry point into the sector.
Digital transformation – Because of the people staying home, the need for digitizing operations will increase leading to more FINTECH deals. This is because of the expectation of a permanent shift from customers to digital services and channels. There is a strong possibility that traditional players will acquire Fintech start-ups as funding sources dry up.February 10, 2021 at 2:11 pm #116987
Great question, Sebastian and I feel that there will be a very nuanced response to the covid crisis, depending on industry, sector and geography.
It is obvious that some industries are more affected than others. However, even within those industries we will see more consolidations, acquisitions and partnerships being born out of necessity. Another aspect to consider will be how quickly the pandemic will be brought under control in certain countries. For eg. The transaction volume will bounce back in countries like Australia where the pandemic is under control compared to the rest of the world. Lastly, organization which has cash are using this as an opportunity to pick up good great assets at good value.February 11, 2021 at 5:19 pm #117051
Personally I think it depends on the industry. You are seeing an increase right now on deals in the tech and pharma industry. We have seen a decrease in transactions in the retail industry and I think you will continue to see the retail industry take a downturn, while tech and pharma continue to increase in the current atmosphere with COVID impacting us. Again, very industry specific in my opinion on M&A activity in the middle of a pandemic.February 14, 2021 at 10:13 am #117100
Edwin Ng, CFA, CAParticipant
Based on common factors of falling interest rates and a bullish stock market, M&A activity will likely see an uptrend in the upcoming years.February 18, 2021 at 3:14 pm #117236
I am expected an increase due to some industries consolidating and others expanding. The reasons for M&A may differ, but I expect more activity in this area since there are so many changes happening in the world.February 18, 2021 at 3:20 pm #117238
Companies with the dry powder can use this time to build muscle through acquisitions. I believe there are deals to be made given that quite a few companies are struggling for liquidity and require capital injections.February 22, 2021 at 4:00 pm #117434
Agreed with the general sentiment that others has brought forward in the earlier reply. From healthcare perspective, I am seeing and upward trend in M&AFebruary 25, 2021 at 3:35 pm #117609
Yoke Chang TanParticipant
I think during a crisis, the industry which is hardest hit should see most consolidation or mergers occurring. The stronger and cash rich companies would acquire the financially weaker companies.February 27, 2021 at 6:33 am #117648
Covid will definitely increase the number of transactions in my opinion. For industries badly affected, it will force weaker companies to consolidate. For industries positively affected, they can use the increase in equity value as currency to acquire their competitors or gain new capabilitiesMarch 11, 2021 at 2:37 pm #118095
I think the number of deals will increase. We are already seeing this by way of the surge in SPAC activity.March 23, 2021 at 1:11 pm #118392
Agree that M&A deal flow should increase given the higher velocity of changes in the world around usMarch 23, 2021 at 8:29 pm #118415
Seems that healthcare and in particular innovative approaches to solving the current gaps will be the rise as innovators merge together to create scale.March 23, 2021 at 10:30 pm #118421
Many companies had time to think about streamlining their portfolios during the pandemic. I see divestitures increasing and strategic acquisitions of small companies that struggled to stay afloat but that have a lot of potential in technology or products.March 25, 2021 at 6:40 am #118447
In my opinion, the number of transactions will increase and could even be higher than pre-covid era. The volatility in the market is creating opportunities and simply put, those who can’t remain relevant and competitive would be eliminated or acquired while others would take this chance to grow even bigger.
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