A year like no other
History would always remember 2020 as one of the most tumultuous years that saw the onset of a deadly pandemic, marked with protests over systemic racism in most parts of the world and a highly contentious election. While everyday life is still far away from the normal, effective distribution of COVID 19 vaccines is arranged so that there can be an end to the disruption that we all had to go through the previous year.
The speed with which the pandemic had escalated had a grave impact on market economies and their workflow. However, economists have predicted that with the increase in the availability of COVID- 19 Vaccines, we can make 2021 a year of global recovery. The year 2021 would be a post-recession recovery phase of a business cycle with an extended period of low inflation and low-interest rate that would help in favouring equities over bonds. Fortunately, the markets have also reacted positively to the highly anticipated return to normal.
Even though the world remains suspended in a state of uncertainty, research indicates that mergers and acquisitions are going to lead the recovery as 53 percent of US Executives plan to increase their M&A investment in 2021. Research also shows that there is going to be a huge shift in consumer behaviour which is ultimately going to drive deal flow & hence deal-making as businesses are looking forward to reframing their future subtly indicating that the year 2021 is going to be a roller coaster ride for the market as the sectors that showed deal-making restraint during the pandemic will be the ones who would drive the next wave of activity for M&A deals.
What research has to say?
According to a research done by EY on the ‘Outlook of transactions in 2021’, ‘With an overall value of US$2.9t, global M&A in 2020 is tracking below 2019’s value of US$3.3t but is still ranked fifth for the value of deals in the post-global financial crisis period. The value of M&A has been dramatically slow in the Asia-Pacific region in the first two months of 2020 but, there also has been a significant increase of 19 percent to it which is a remarkable sign. In the case of America, the M&A values have declined by 29 percent to US$1.27b with the US market seeing a fall of 80 percent at the initial days of the lockdown as compared to 2019. In EMEIA, the decline in deal value is more limited (3 percent) to US$815b, with the region having regained most of the lost ground from earlier in the year’.
If we specifically talk about sectors then, the consumer sector has seen an increase in M&A activity involving assets that were struggling through the pandemic and is now led by more financially resilient customers. There has also been a significant rise in business acquisitions driven by innovative companies with a strong link to their customer base.
The Private Equity (PE) sector is also likely to be more active in the recovery stage of 2021 and the growing presence of special purpose acquisition companies (SPACS) might act as a driving force in bringing other forms of capital to the deal table this year. Some data by S&P also show how there has been an odd recovery in tech M&A deals that even outpaced the stunning bull market rebound on Wall Street. It mentioned how tech acquirers and investors enjoyed a rare ‘V-shaped’ recovery last year in an otherwise ruined pandemic.
There have been some positive projections for M&A activity in 2021. According to Dykema’s (a leading national law firm, serving business entities worldwide on a wide range of complex business issues) 16th Annual M&A outlook survey, respondents have responded very optimistically after a year of tempering expectations. According to the report, ‘71 percent of respondents expect the M&A market to strengthen over the next 12 months, up from 33 percent in 2019, and 87 percent believe M&A activity will increase in the same timeframe. The rise in optimism reflects market conditions and a belief from respondents that the worst is behind them – with both financial and strategic buyers seeing opportunity in a hobbled economy. Further, 60 percent of respondents say their outlook for the U.S. economy is positive over the next 12 months’.
Apart from this, Thomas Vaughn, Co-leader of Dykema’s Mergers and Acquisitions practise mentioned “The pandemic will continue to influence the deal market over the coming year, but there is a surprising level of optimism among deal-makers that its impact on M&A will wane over time. With 72% of dealmakers expecting to close a deal in the next year, whether you’re a strategic or financial-focused buyer or a seller hoping to cash out, there are opportunities in the M&A market for the right deal.”
If the numbers don’t work for you, then let us make it more simple for you. Keeping in mind that it takes 9+ months on an average to close M&A deals after the owner decides to move forward with the idea, the last quarter of the year becomes the PRIME time to engage with MergerWare, a SaaS based secure M&A platform and learn about the most appropriate techniques and M&A strategies through our integration software which can not only help you in sealing the deal but also ease out the complex M&A process for your organization.
Believe it or not, but now is the time for you to act!
For more detailed information on building a highly effective M&A deal execution and integration strategy read, “How to build an Agile and Highly Effective M&A transaction” or alternatively you can write to [email protected] for more details information on how to execute an effective deal execution M&A strategy through MergerWare platform.