Q3 2020 SS&C Intralinks Deal Flow Predictor: COVID-19 Impacts Global M&A
Navigating M&A’s future in the wake of the COVID-19 crisis
19 May 2020
In an unprecedented new issue, the just-published Q3 2020 SS&C Intralinks Deal Flow Predictor examines the current state of mergers and acquisitions (M&A) amid a global economy upended by the COVID-19 pandemic.
As the world faces extreme financial and economic challenges, due diligence and valuations have gone out the window for now. While some deals have been completed since the pandemic began, some M&A transactions have been paused, and others are taking longer to complete during this time of lockdowns and travel restrictions. Many companies are struggling to sustain operations and bankruptcies and restructurings are likely. I would like to share three key points from the latest report:
Using Q1 2020 as a marker
For Q1 2020, a quarter that was initially marked by an uncertain global economic environment, worldwide M&A deal announcements grew 1.7 percent YOY (except in APAC and LATAM) and deal volumes rose almost 9 percent in February alone. By March, COVID-19’s onset brought a global YOY decline (Japan was the outlier in both cases). The sharpest drops were in ME, Africa and LATAM.
Megadeals still being inked
Though 10,000 deals were announced for Q1 2020, new deal starts weakened, with a 10 percent drop from January to March. Still, few megadeals have been withdrawn – and there has been a pandemic-related spike in the number of withdrawn deals.
Hurt sectors may be resilient for H2 2020
After having been impacted by store shutdowns and price drops in resources, the Consumer/Retail, Energy and Power, and Materials sectors seem ripe for restructuring deals going forward. Distressed cases in sectors such as industrial products, tourism and automotive will continue, while telecom, tech and healthcare will benefit from the health crisis.
Cautious optimism recommended
The post-COVID-19 global economy may recover quickly once shutdowns are eased and some normalcy is returned. Fiscal stimulus packages from governments and central banks will aid recovery. So could private equity, with over USD 2.5 trillion in dry powder and many motivated PE managers. Also, non-core businesses could be divested to raise cash while some could become discounted opportunities for buyers.
For now, we are seeing market uncertainty. Deal timelines will be extended as “damage assessments” become clearer.
The Q3 2020 SS&C Intralinks Deal Flow Predictor also includes a spotlight feature on the rise of M&A shareholder activism and an interview with Sen Zhang, director of Global Fund Management at leading Chinese private equity firm JD Capital, on the state of private capital. You can download your copy here. Enjoy.