Insights from the global M&A market in 2020
Category: Mergers and acquisitions
A major impact of the corona crisis was digitalisation. Within companies themselves, a McKinsey Global Survey of executives found that the corona crisis sped up the digitalisation of internal operations by three to four years. Within M&A transactions, the corona crisis forced parties to conduct virtual due diligence, as well as virtual negotiations and integration. Despite technological advances brought about by this process, digitalisation also created particular difficulties. For example, the corona crisis restricted on-site visits and other key components to the due diligence process. Within its report, Bain & Company found that 70% of M&A practitioner survey respondents stated that remote due diligence was particularly difficult.
Governments and regulation
Bain & Company’s report also highlight the increased role played by governments in global M&A transactions in 2020. Examples of this include the German government’s approval of new powers to reject hostile foreign takeover bids of healthcare companies, including German manufacturers of vaccines and medicines, and China Mengniu Dairy’s withdrawal from purchasing the Australian beverage company Lion Dairy, after receiving an indication that the transaction would be refused by the Australian government. This development shows the need for cross-border investors and practitioners to continually keep up to date with regulations within foreign markets.
Localisation of deals
Another trend reported by Bain & Company in 2020 was the localisation of deals. This was exacerbated by concerns over supply chains as a result of the corona crisis. In regards to cross-border transactions, the report outlines a fall of 29% for Asian outbound deals into the US and Europe in 2020, while global cross-regional deal volume fell by 20%.
Industry dependant valuations
Unsurprisingly, certain industries fared better than others in 2020. Industries such as technology, telecommunications, digital media and pharmaceuticals thrived as a result of the corona crisis, with valuations increasing. On the other side of the spectrum, industries such as retail and energy saw their valuations decrease.
For the full report see the Global M&A Report 2021.