Virus delivers blow to M&A activity
By Devin Banerjee, CFA, Editor at LinkedIn Updated 2 weeks ago
Corporate dealmaking is grinding toward a halt as ripple effects of the coronavirus pandemic hit confidence in corporate boardrooms and C-suites. Global merger and acquisition activity in March has slumped 18% so far, with activity for the year down 8.8%, according to Dealogic data. In the U.S., M&A was outpacing last year’s activity until the outbreak of the virus reversed the trend this month. "How can you sell a company if you can’t go and look a buyer in the eye?" one banker said regarding the halt in travel. The coronavirus pandemic has served a body blow to boardroom confidence, and CEOs are training their focus on their people and businesses. As a result, M&A activity is slumping. Earlier this week I spoke with PwC's Neil Dhar to go deeper on the state of dealmaking. Dhar said he expects a "pause" in M&A for several reasons: 🤝 It's difficult, if not impossible, to perform proper diligence as travel grinds to a halt and the health of workforces is in flux 🤝 It's difficult to price risk in the face of business and economic uncertainty 🤝 Securing financing at the right price has become a challenge amid the volatility in capital markets Going forward, expect increased scrutiny around material adverse change clauses and more stock-for-stock deals due to the overall uncertainty, Dhar said. He does expect a pick-up in spinoffs, split-offs, and unsolicited proposals — both friendly and unfriendly — as companies look to alternative avenues to pursue growth. "All of that said, well-capitalized and well-run companies won't need M&A to survive in the near term," he added.