Impact of COVID-19 on Mergers and Acquisitions
- Skytech M&A Team
- 22-09-2020
- Business
The pandemic or COviD-19 effects continue to unfold not only on public health but also in the corporate world. The global business operations and economy sector has witnessed a sea of change in M&A (Mergers & Acquisitions) transactions, with deal pipelines limited to value buying and bargaining for cheap assets. Since the M&A sector has been affected due to COVID-19, it’s important to implement measures to mitigate the risk associated with it.
The crisis that happened due to coronavirus will continue to have a material global impact on mergers and acquisitions. Henceforth, there are thousands of businesses have cut back or called-off their operations significantly, millions of daily wagers have found it difficult to earn bread-butter, expanses of customers have been decreased, supply chains have been broken down, demand for crude oil has dropped.
Until the COVID-19 has not spread its wings in the corporate world, the M&A segment witnessed a major rise in the number of deals. The experts had predicted that the 2020 year would be beneficial and end up as another strong year for the M&A sector.
However, the catastrophe has completely altered the horizon of the economic world and has brought about unprecedented economic challenges for every company and people across the globe. The unexpected wave of the pandemic is making it extremely difficult for companies to evaluate the potential impact on their business prospects. To the consequences of that outbreak, there’s a plummet in every phase of business, from customer expenses to the supply chain of commodities.
However, post COVID-19, the majority of the industries may have to fight to survive and some of them may even have to face the prospect of a business closure. But, as we know ‘necessity is the mother of invention and adversities bring out opportunities’.
What I feel from my experience and research is that companies facing survival challenges may end up joining hands with other companies via mutually benefitting business strategy to survive the unprecedented economy. And this is likely to bring the mergers & acquisitions back to the picture, forcing financial institutions to leverage the stressed assets. The winning M&A strategy would be to optimally explore the potential business opportunities with an apt business strategy along with to mitigate the business risks that will be the yardstick for a successful M&A.
Moreover, post-COVID-19, let us tell you why acquisitions are going to create value in this weak economy. A business can leverage the current atmosphere to execute its strategic acquisition agenda and accelerate out of the recession. Moreover, a company can focus on rushing towards the target during the downturn - when your competitors are thriving to sustain and survive in this crisis - and then reap the benefits from synergies in the recovery.
How Can You Win with Mergers & Acquisitions?
You will find several strategies to sail your boat in this outbreak for transactions in a weak economy with M&A.
(1) Do not just look or think about your business, but look at the horizon of the business - beyond that. If you are acquiring target markets in your core industry during a downturn, it creates a value of 4.6% in one year RTSR. Then think of getting benefits even more from non-core acquisitions, as it creates a value of 8.5% in one year RTSR.
(2) As we know experiences play a vital role in every business. You should know when and where to play the card. Otherwise, you should learn from experienced dealmakers like SkyTech Consultants. Acquires that regularly engage in M&A likely earn more returns from downturn deals that are five times higher than those earned by occasional dealmakers. When we talk about the current scenario (COVID-19), experienced dealmakers like SkyTech Consultants can help you leverage your well-honed, structured approach. This means conducting a focused due diligence process - without being distracted by external factors, deploying scenario planning in order to be prepared in a fast-changing environment, and rigorously integrating targets to jump-start value creation.
(3) No matter wherever you reach the peak of your business or dealing with other companies, you should not take value creation for granted. During weak economic times, if you are acquiring underperforming assets, even experienced dealmakers create value in only half of their deals.
(4) Consider de-risking your M&A strategy. If your business or industry is under financial crisis due to the current situation, you should consider deploying tools other than outright M&A. you should form and develop strategic alliances such as find out some ways to resolve short-term supply chain issues.
Additionally, there are several steps that can be taken care of by corporate decision-makers.
(1) Be Ready:
If you don’t have a plan of action for the targets that fit your strategic agenda, then you have to be ready to develop one now. You may get many buying opportunities soon.
(2) Be Calm & Don’t Panic:
It’s not the time to shed assets, potentially at fire-sales prices - even if investors might appreciate spin-offs and divestitures in the short term. At a long period of time, panic-selling does not emerger out as a valuable asset. In any case, the door for IPOs and other forms of divestiture has closed.
(3) Be Fearless & Bold:
The existing situation might tempt you to stick with what you know. But it’s a position of risk-takers - dealmakers that utilize downturns to get ahead of the curve and stand out stronger.
We’re Here to Help You Out!
Many companies have no ability to navigate unprecedented global health and financial crises. They are unable to survive and sustain in this financial crisis. However, by merging with experienced dealmakers - SkyTech Consultants will be the best option at this time. We will surely help you out to survive the crisis and accelerate out of the eventual recovery. Mergers & Acquisitions will play a major role in companies, having a strong balance sheet.
At SkyTech Consultants, we will help you respond to the challenges of COVID-19, providing expertise in these urgent, critical and complex environments. Our experts will help you address today’s M&A needs and open the door of success in the never normal.
So what are you waiting for today? For more information regarding M&A, visit our website - https://skytechconsultants.com or contact us.