News / Insights

The Impact of the Coronavirus on the M & A Market

The Coronavirus caused a strong shift to intracontinental and local transactions in the M&A market. A trend that will continue in 2021.

What impact did the Coronavirus have on the M&A process?

Virtual working has become the standard, and that has made a lot of things more efficient. On the other hand, there is a negative impact on relationship building and mutual trust. It is also more difficult from a distance to get a good understanding of the culture, the kind of people who work there, what the infrastructure looks like, and how the company generally functions.  Certainly, on international acquisitions, this has had a major influence, and we have noticed a strong shift to more local, intracontinental transactions. Transactions in other continents are successful usually only if the buying party is already locally present. This is one of the places CDI Global can add value as we have many local offices.

 

What do you expect from 2021?

In 2021, the focus will continue to be on local transactions. In addition, many companies will put their non-core businesses up for sale. If that is qualitative, there will certainly be a lot of interest in it. The interest in acquisitions for growth remains high despite the crisis. Also, private equity worldwide has over 2.5 billion dollars to invest.  As a result, we still live in a seller's market. Quite a few companies have learned that it is important to have more control over the value chain and become less dependent on suppliers on other continents.

 

What advice can you give?

We recommend that you be proactive on a regular basis and stress test before the sale. What are your strong and weak points? What is your appreciation? Who are the potential buyers or investors? Many companies were surprised by the crisis and were therefore not well prepared for a sudden sale or a quick pick-up from investors. CDI Global can help provide guidance in this situation.

 

2020 in a nutshell:

The M&A market fell almost completely silent in the second quarter due to the corona crisis.  Generally, transactions were put on hold and there were only a few new transactions started.  The M&A market picked up in the third quarter to quickly get back on track. This was due to restarting earlier transactions and, to a limited degree, new transactions. In fact, the fourth quarter was a very good quarter showing a clear catching up.  In general, 2020 was still a pretty good year. There was a decrease of about 15% of deal value in Europe compared to 2019, but 2019 was a top year. Certain sectors were and are very popular, like TMT, software, financial services, healthcare & life sciences, food & beverages, etc.

This article was originally published in the Belgium business and economic magazine Trends. Read the original Dutch version here.

Marc De Clerck

Managing Partner, CDI Global