The Covid-19 pandemic has resulted in widespread disruption to the economy, but it has impacted different industries in different ways. There are some businesses that have thrived in the new “stay-at-home” world but others who are now struggling to survive. This range and disparity mean that the mergers and acquisitions market has become very interesting, with various strategies that may be employed. Many acquirers are currently employing a more defensive approach, opting to step back from or slow down deals in order to be able to gauge the market further and wait for the situation to stabilize so that they can get a better picture of their path forward.
The lack of deal presence of these firms have led to the overall volume of M&A deals to go down. Some firms are employing more defensive M&A strategies and taking necessary steps to weather out the economic downturn and falling consumer demand. For example, the hospitality and energy industries have been hit especially hard and may be seeking acquisitions that can help them make revenue in other ways and prepare for a post-pandemic world. A particular example of this can be how athletic apparel giant Lululemon recently acquired Mirror, a company that specializes in technology that allows for home workouts. As we all know, gyms have been closed for the past few months and Lululemon, a company that sells athletic wear, has predictably been hit hard, with their revenue dropping 17% in the first quarter of 2020. Their acquisition of Mirror is an attempt to find ways to keep demand for their products even without gyms being open. Lastly, financially healthy firms despite the pandemic and with cash on hand can seek offensive acquisitions, buying struggling competitors, or expanding their horizontal and vertical reach. Each firm should take into account their goals, financial health, and market wellbeing in order to decide on their M&A strategy.
Bender, M. (2020, June 19). What M&A Looks Like During the Pandemic. Retrieved July 01, 2020, from https://hbr.org/2020/06/what-ma-looks-like-during-the-pandemic
Wagner, M. (2020, June 30). How the Pandemic Has Affected Mergers & Acquisitions. Retrieved July 01, 2020, from https://www.worth.com/how-the-pandemic-has-affected-mergers-acquisitions/