What will be the outlook for post-coronavirus M&A?
At AddVANTE we are confident that in the coming months we will enter a new business environment that we are currently having a hard time seeing clearly, although we anticipate that in many sectors new opportunities will arise quickly and in others recovery will be slower.
We have received many questions this week from clients and potential clients about how the M&A sector will behave during these weeks and especially from June or July when the recovery in economic activity is expected to begin.
These are some points that define our vision of what will happen in the coming months:
- In general there is a slowdown in the development of operations, especially those that are already in due diligence or more advanced negotiation steps. Other projects in the phase of searching for investors or targets to be bought follow their usual process.
- The investment and venture capital funds that last year invested approximately 8,500M euros in Spain in a total of approximately 700 operations, expected to increase their investments in the State by over 7%. The liquidity derived from this activity is still in place so we expect all operations to be concentrated in a few months. Certainly some capital companies will need to consume their funds during 2020 in order to raise new ones in 2021. We therefore expect a lot of activity in the coming months.
- The injection of liquidity that the Spanish government is announcing will offer new opportunities to those healthy companies with ambitions to give a boost to their inorganic growth. For them, new opportunities will appear that were not available to them before the COVID-19 crisis.
- Those family businesses without a clear succession or already considering a divestiture will likely accelerate the potential sale of their companies after the lock-in. Two crises in less than 10 years are difficult to digest.
- Once the standstill is over, investment opportunities will arise in distressed companies.
- We anticipate an adjustment in company valuations and very likely greater negotiations in the structure of operations, especially a greater incidence of deferred payments linked to future results.