On January 19, 2021, the international commercial law firm DLA Piper and the German Mergers & Acqusitions Association (Bundesverband Mergers & Acqusitions e.V.) jointly hosted a digital presentation entitled “The global M&A market in times of Corona – An evaluation of current transactions“. After a welcoming address by Prof. Dr. Kai Lucks, Head of the German M&A Association, he handed over the floor to the two speakers, Dr. Nils Krause and Gerald Schumann, both partners at DLA Piper. Both advise domestic and foreign clients on M&A transactions, both public takeovers and non-public mergers and acquisitions, private equity and venture capital transactions.
In their one-hour presentation, Dr. Nils Krause and Gerald Schumann guided the participants through current developments and possible future effects on the M&A market in the wake of the coronavirus pandemic. DLA Piper publishes the annual “Global M&A Intelligence Report“, which has analyzed more than 2,500 M&A transactions in which DLA Piper has been active worldwide since 2015. Due to the pandemic, an update of this study has recently been published, which formed the basis of this presentation.
The speakers explained how many market participants experienced the sudden standstill of the M&A market from mid-March 2020 at first hand. The uncertainty, but also the concerns, were very high among companies and investors. Most M&A transactions were put on hold and nobody really knew what would happen next. Surprisingly, however, the M&A market then recovered quite quickly, especially in comparison to the global financial crisis in 2008, and deal flow picked up again significantly from mid-May.
According to DLA Piper’s M&A report, the number of distressed M&A transactions is expected to increase significantly in the future when the government support that has given companies breathing space in the short term disappears. Distressed M&A could have a significant impact on the global M&A market in 2021. There is a clear expectation among the jurisdictions surveyed that the pandemic will lead to an increase in litigation relating to M&A transactions.
The study also shows that M&A transactions were primarily carried out in economic sectors that continued to grow in 2020, driven by the pandemic. The technology sector accounted for the largest share of transactions (18%), followed by the food and beverage industry. Especially during the lockdown, digital commerce has become irreplaceable and demand for consumer staples is booming. Highly competitive auctions with a large number of bidders were observed, especially for attractive assets, for example in the pharmaceutical and technology sectors. While most transactions still involve the full acquisition of a target, there has been a significant increase in minority shareholdings, which is also due to buyers securing the opportunity for a second due diligence. In the uncertain economic situation, the focus on the buyer side was primarily on cost reduction and risk minimization.
If you are interested in the report, you can request it via the DLA Piper website, dlapiper.com.
