In a short time, the Corona virus (Covid-19) has caused a global economic crisis and significant business interruption. As a result, hundreds of thousands of businesses to shut down, thousands of workers lost their jobs, and the economy took a major hit, with Mergers and Acquisitions (M&A) being no exception.
M&A plummeted globally and hit a stalemate. Particularly in the US, only in the first quarter, the M&A levels decreased by more than 50% compared to 2019. Among other things, companies’ leaders are forced to change their strategy, shifting their focus on maintaining the company’s activities, and keeping away from longer-term goals such as acquisition plans. In order to focus on dealing with the pandemic, pending M&A transactions were canceled or postponed. For example, Xerox abolished the 34 billion proposal for HP, or SoftBank dropped its bid of $3 billion for WeWork shares.
Drop offs in M&A deals is not the only reason for reducing M&A level, but also due to the whole process of M&A agreements (including ongoing and new agreements), which are expected to be significantly extended. A typical M&A transaction, which involves preliminary discussions between the parties, negotiating terms, negotiating acquisition agreements, will all be delayed. It is the result of delays in regulatory approvals, longer time to obtain third-party consents, longer time for negotiation because all parties will be much more cautious.
Harroch, R., Lipkin, D., & Smith, R. (2020, April 17). The Impact Of The Coronavirus Crisis On Mergers And Acquisitions. Forbes. Retrieved from https://www.forbes.com/sites/allbusiness/2020/04/17/impact-of-coronavirus-crisis-on-mergers-and-acquisitions/#6378c5a7200a