How will Corona affect global M&A activities?

This topic contains 4 replies, has 5 voices, and was last updated by  Navdeep Singh 20 hours, 33 minutes ago.

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  • #109903

    Tobias
    Participant

    How will Corona affect M&A activities because unlike other past crises this one is based on both, a demand and supply shock? Will the number of transaction globally plunge e.g. after 2000 or decrease only slightly e.g. after 2007? I’m curious to hear your opinion!

    #109972

    Jay
    Participant

    I believe the number of transactions globally will definitely decrease, but I believe there will be some activity. There are still companies with great balance sheets and strong infrastructures/supply chains that can take advantage (I was on the sell side to a Fortune 50 in 2008). The Fortune 50 company gave out their first dividend ever during our Due Diligence process early 2009 and had leverage to really drive down purchase price in rough times.

    #110389

    Paul Reed
    Participant

    Interesting topic Tobias, I’d like to hearing everyone’s opinion in this, and what they are seeing.

    Personally, and just from my experience, I am seeing an increase in small-mid market owners inquiring of selling their business, or looking to partner with investors, and private equity firms are taking notice. As such, I believe small-mid market fragmented industries are ripe for roll-up acquisitions, and therefor will experience increased activity.

    I feel the pandemic can be treated from other past crisis, such as the 2008 global recession, reason being, is that corporations may begin to work differently, and so from a more macro/global position, I believe we will also invariably see an increase in M&A.

    This will be encouraged for the following reasons:

    a. interest rates will encourage investment
    b. overcapacity may be recognized in industries; and most importantly
    c. acquirers will begin to identify non-essential costs in targets in what might be a new working normality and seek to capitalize on de-layering and reducing overheads to increase value and profitability

    #110529

    Andre Hamilton
    Participant

    I believe that the Coronavirus will create needs in some spaces that otherwise would not be needed. I think pandemic will cause some to become aggressive in finding deals and opportunities, and then conversely cause some to retreat when it comes to deal finding. If you look at the financial crisis of 2008, many firms saw financial prosperity by taking chances and hedging that the markets would have a positive turn. I think a similar opportunity is available here as well.

    #110605

    Navdeep Singh
    Participant

    I personally see an increment in M&A activities, due to the devaluation of struggling companies, where cash rich companies taking the advantage of COVID-19 situation. Second supporting element supporting Cash rich/ non-struggling companies is the lower interest rates.

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