Changing face of M&A?

The impact of COVID-19 has sent shockwaves across the world and we are all still managing  the many personal and business changes as a result. Every sector has experienced change and we have seen the unprecedented impact on the global economies.

We are all working to unknown timescales. It is impossible to predict the future, but it is clear the impact will likely reverberate for months to come. However, the key difference from now to the last recession is that we are facing a self-imposed and hopefully shorter recession and we are not experiencing a financial collapse. Money is available and although the M&A market has undoubtedly slowed down, the pandemic will lead to a raft of opportunistic and distressed M&A activity in the short term.

Building resilience  

When the furlough scheme comes to an inevitable end and businesses start to repay loans, we will see many being squeezed financially and unable to manage their cashflow which will result in business failure. This will present opportunities and while strategic and private equity buyers are of course facing their own business and operational challenges, many continue to be “cash-rich” and generally can afford to bide their time to find the right acquisition targets at the right price. Good businesses who have proven to be resilient through the crisis will retain value and will also see attractive opportunities to sell or expand with the acquisition of complementary businesses.

Opportunity awaits

The upsurge in activity will come when the uncertainty ends, as dealmakers will want to make up for lost time. That’s not to say deals are not completing during the pandemic, as time goes on we are getting more used to the situation and buyers and sellers (and advisers) are adjusting and becoming more active again. Despite general optimism for M&A, challenges remain. The world will be changed fundamentally as a result of Covid-19 and no one knows the longer economic impact, but we are confident of a positive outlook for a rise in M&A transactions.

For further information on how our Corporate Finance and Banking team can advise businesses considering M&A options please contact Tony Farmer: tfarmer@garbutt-elliott.co.uk