The year 2020 was very atypical in terms of M&A, with a clear stop in February/March due to Covid-19. Companies focused on their liquidity, halted ongoing transactions, and some even tried to exit or renegotiate transactions already signed. From the end of August onwards, M&A activity started to pick up again, though volatility was still high and visibility low. Investors are learning how to manage the short-term uncertainties caused by the virus.
Depending on the sector and the impact of Covid-19, the nature of M&A activity was very different. Highly impacted sectors focused on disposals to stabilize their balance sheets and eliminate underperforming areas. Growth sectors – such as pharmaceuticals, technology and payments – were booming and consolidating at very high multiples for strategic reasons. Meanwhile, others took advantage of the situation to accelerate execution of their business plans.
Basically, the entire M&A market, companies and their shareholders, were driven by low interest rates and the need to invest cash. It’s worth noting that the share of M&A transactions carried out by companies vs. private equity has increased.
Listed markets (debt and equity) fully played their role during the crisis by allowing companies to raise funds quickly and to identify consolidation and investment opportunities. New instruments started to take off, such as SPACs in the United States. We expect to see this trend take hold in Europe as well.