As economic uncertainty took hold in March this year, it is hardly surprising that most merger and acquisition (M&A) activity ground to a halt. In a world where usual business operations had been turned upside down, boards were focused on day-to-day survival. What has perhaps been more interesting is how M&A has bounced back, with bankers expressing pleasant surprise at how quickly market participants have been to re-engage with the idea of such transactions.
The second quarter of this year ranks as one of the worst on record for global M&A according to Mergermarket data, with just $372.2bn worth of deals being done – the lowest total since the third quarter of 2009. Fast forward to three months later and almost two and half times more activity took place during the third quarter.
Separate data from Refinitiv shows that, as of the end of October, the total value of deals done was down by 14% compared to the same point in 2019. In more ordinary times that may denote a year on course for a disappointing end, whereas in 2020 it suggests a recovery.
Driven initially by activity within so-called Covid-winner sectors like technology and healthcare, the market has now broadened out. Market participants have also adapted to doing business remotely. In addition to video conferencing, remote site visits using drone footage is just one example of how teams have had to adapt and think creatively about how to keep doing business.
And all the key ingredients appear to be in place for continued robust activity in the coming months, with capital markets providing ready access to cheap capital and private equity firms flush with cash and keen to invest. The news that several viable vaccines could become available by the start of 2021 provides a further boost to market confidence.
