2020 M&A Spotlight
As the global pandemic drags on, 2020 deal volume is still significantly reduced compared to predictions made last year, although the initial pause put on deal making is starting to waiver. One of the key factors for successful mergers and acquisitions is the ability to predict market trends. The uncertainty of the current global market makes those predictions much more difficult, pushing some would-be sellers into hibernation mode.
Globally, M&A activity has dropped to its lowest half-yearly total since 2010, with several signed deals from 2019 falling apart before they could be completed. The high uncertainty of the global market has created resistance for companies seeking buyouts in more traditional industries. Nevertheless, companies and financial sponsors, for both strategic reasons and necessity, continue to seek out potential transactions for consideration.
In the United Sates, M&A deal volume is down 60% from 2019 levels, leaving significant cash available for investment. While pressure from the expiration of fee holidays for stored equity is driving the search for acquisition opportunities, several obstacles are impeding the normal process for M&A transactions. Meeting and travel restrictions complicate the traditional due diligence process and make on-location site inspections and face-to-face negotiations next to impossible. Still, dealmakers are introducing creative approaches to adapt to the current environment. For example, CDI Global has developed Agora, a new global conferencing software. This allows our experts from around the world to weigh in on potential merger and acquisition opportunities in virtual face-to-face meetings.
Pricing is another challenge due to the unpredictable market hampering accurate predictions of future cash flows. While owners would prefer to sell into a healthier market, there are still investment opportunities to be had. Cash heavy investors are looking at buying distressed companies but are also focused on strategic deals for healthy companies.
At first glance the statistics may seem discouraging, but read in reverse, you still have nearly 50% of M&A players moving forward with deal making. CDI Global believes there are very attractive opportunities today for add-on acquisitions, especially involving middle-market and cross-border transactions. While rescue deals and restructuring are likely to attract media attention in 2020, buyers and sellers can take advantage of current opportunities for strategic business combinations that will strengthen business competitiveness and position them to thrive as the global economy recovers.
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CDI Global Executive Managing Director and Chief Executive Officer