During economic crisis deploying capital for M&A is a risk or opportunity?

This topic contains 8 replies, has 9 voices, and was last updated by   8 months ago.

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  • #110421

    Deepak kumar swain
    Participant

    COVID-19 crisis had an impact to world economy and its affected across the industries with an exception to few. with so much uncertainty, it might create a wave of consolidation. whether CEOs should look this as an opportunity or risk?

    #114313

    Karl Heinz Foertsch
    Participant

    If the acquiring company has a healthy balance sheet, a clear acquisition strategy and is patient to wait for the right opportunity economic downturns are a good opportunity to buy a competitor to consolidate the market or to buy complementary technologies or services. As long the acquirer know what it is doing risk should be minimal.

    #114350

    The Ccovid-19 pandemia provides two options for companies who have the resources to go on a shopping spree:
    1. There will be some great companies who do not have the cash resources anymore to keep up. They need at least an investor and/or strategic partner to survive the situation. Therefore, if the strategic fit is given and the cultural aspects are sound, I would advise to go for a deal, even if the financial aspects are not up to par.
    2. The pandemia has sped up the trends in some industries – especially eg. e-Commerce. Due to this companies have to move quickly to be able to meet these demands. As developing new solutions is a time intensive process, it is easier to acquire another company that already offers the service/product you need.

    #114439

    Arlene Clinkscales
    Participant

    COVID-19, as with other global crisis that have had major economic and market implications, will present winning opportunities (and losing for others) for companies that can position themselves in such posture. With something so significant, it’s sometimes hard to reasonable predict the extent and duration of the crisis, so, the decision to start acquiring those companies that are not able to survive can be tricky. A lot will depends, of course, with the long-term as well as short-term strategies. It’s a risk to just buy up companies because they maybe at a ‘bargain’.

    #114445

    Yaw Adom-Boateng
    Participant

    The Covid-19 pandemic certainly has created numerous challenges for most firms across the world. There are opportunities and risks, thus CEOs need to assess the firms current situation and long-term vision so as to determine whether Covid-19 has presented it with a good opportunity for M&A or it rather posses a serious risk.

    #114477

    Brandon Kissinger
    Participant

    While history seldom repeats itself exactly, we are all familiar that it sure does rhyme. I would imagine that the affects the broader market is feeling because of the COVID-19 pandemic will create various opportunities for those well prepared and well capitalized.

    #115345

    Belema Obuoforibo
    Participant

    Can be either an opportunity or a risk, or in fact, both – depending on the circumstances of the company.
    For example, a company with sound finances that is looking to acquire promising targets for consolidation – this would be an ideal opportunity. Due to depressed share prices, it may be able to acquire such companies for a good price. That said, such target companies might quite reasonably feel that their value has been artificially depressed by the economic crisis, and may not be willing to be sold under such circumstances.

    #115434

    Jass Lim
    Participant

    Double-edged sword, which depends on the person wielding the sword and how he uses it.

    #115435


    Participant

    The crisis may have left many businesses incapable of sustaining themselves. But these may have valuable IP or other assets that an acquirer can obtain a an attractive valuation. Other industries may have benefitted immensely from reduced bricks-and-mortar shopping and more online shopping, such as businesses engaged in online payments alternatives. These businesses may be growing and could afford acquirers attractive ways of expanding into geographies where the addressable market has yet to experience significant penetration.

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