The M&A Year 2020 in Review
Heading into 2020, global M&A activity was declining, with both a deal value and deal count falling in 2019 compared to the all time high levels of previous years.
Deal count levels were expected to decrease in 2020
In 2019 Europe maintained its deal count level, while the Nordic region struggled to keep up. Macroeconomic events and uncertainties such as trade wars, Brexit and signs of economic slowdown could explain this decline. The economic downturn could have brought interesting opportunities for dealmakers, who had been piling up cash heading into 2020. However, the start of the year turned out to be challenging for dealmakers as the Coronavirus pandemic further reduced M&A activity.
Coronavirus & macrotrends continue to hurt M&A
Heading into the second quarter of 2020, the global economy was being hammered by the Coronavirus pandemic. The pandemic was limiting the possibility to travel and meet face-to-face, which arguably impacted the possibility to conduct M&A discussions. Not having the same communication possibilities surely complicated such re-negotiations, but simultaneously motivated a desired delay of ongoing deal discussions.
“When economies grind to a halt,
so does the M&A process”
The M&A opportunities of an economic slowdown are not free of challenges. Time required for closing deals often increases when economies slow down. A reason for this slowdown could be that dealmakers become more careful and selective during economic downturns, leading to extended and more thorough due diligence processes.
“Several previously healthy businesses are under
serious financial stress and may become M&A targets”
After the drop of M&A activity during the first half of 2020, technology, healthcare and financial services deals led to a M&A recovery resulting in a record third quarter with more than $1 trillion worth of transactions around the world. Access to cheap financing and a stock market rally gave many chief executives confidence to pursue M&A transactions. This spike did, however, fail to take up the loss at the start of the year. Overall, worldwide M&A deals were down 4% in 2020
“Dealmakers see the recovery picking up steam in 2021,
with companies eyeing on acquisitions”
Looking into 2021, deals are expected to keep up. The newly elected U.S president and the Brexit deal bringing political certainty, the end of the pandemic in sight and strong capital markets all result in dealmakers' confidence levels remain high.