Posted: August 4, 2020
Corporate mergers and acquisitions (M&A) encompass the consolidation of companies through various types of transactions. Merging refers to two entities coming together to form a new combined organization. Acquisitions refer to one entity taking over or absorbing another entity. To maximize reach or wealth, corporations often have good reason to consider mergers or acquisitions. Financial strength can be gained through the merging of two entities. Similarly, the absorption of one entity into another may have a positive outcome as far as reach or positioning. But how are corporate mergers and acquisitions being affected by COVID-19? There is no denying that many strains and changes are occurring on the market. Are there more opportunities for well positioned organizations to acquire or merge during a global pandemic such as this? Or are mergers and acquisitions being halted by the catastrophic virus? Indications show that COVID-19 is slowing down M&A. Global mergers and acquisitions have seen a near standstill by the end of the first quarter in 2020. With major impacts along entire supply chains, it’s no surprise to see effects similar to previous economic crises. There are ample examples of pending corporate mergers or acquisitions being called off or delayed during this time of uncertainty. Mergers and acquisitions that continue moving forward or new deals that will be made will likely be delayed longer than usual. A multitude of reasons may be causing delays of forfeiture of transactional deals. One consideration is that corporate executives involved in acquisitions may simply be focused on other matters in order to maintain healthy operations. Buyers and sellers alike should look more closely at deal terms in order to address needed updates in this unexpected climate. Buyers that move forward with acquisitions may request expanded due diligence to assess the impacts of COVID-19 on the seller’s business. There is a lot of evidence to support the fact that mergers and acquisitions will be very much slowed by the spread of COVID-19. Will buyers seeing new opportunities and bargains cause an increase in mergers and acquisitions activity in the wake of the virus? COVID-19 has majorly disrupted the global economy. Nationally, scales have been tipped. Sellers who were in a great position prior to the viral outbreak are now seeing tables turned as buyers and investors are finding positions of strength. Buyers will be re-assessing diligence activities, closing conditions, and likely asking for a reduction in purchase price based on effects of COVID-19. Will the strengthening position of buyers in the market encourage mergers and acquisitions? Businesses that show solid fundamentals may prove to be great targets for acquisition even in the face of uncertainty. Not all companies are being affected to the same extent by COVID-19. As we recover from the impacts of the virus, there will likely be an increase in mergers and acquisitions as corporations divest to encourage focus. The companies to acquire may not be failing, and capable buyers will likely be eager to acquire. It is unclear how COVID-19 will affect corporate mergers and acquisitions in the long-run, but there is currently evidence to support both growth and decline. To learn more about maximizing executive salary, visit our Contact Page, or contact us directly by email at firstname.lastname@example.org or by phone at 415-618-6060.