The Impact of COVID-19 on M&A

The Pandemic has affected the economy, and all kinds of businesses and industries. In the M&A world, this economic crisis has made buyers delay or cancel any acquisition plans that were originally in the process of occurring.

The effect of the pandemic is not only affecting the financial aspect of acquiring a business, but also new due diligence processes, deal arrangements, term pricing and other transaction approvals.

Here are some ways on how M&A has changed throughout this time:

• Deal Activity: Companies that would have been strategic buyers of other businesses, slowed their acquisitions initiatives since most of these companies had to focus on taking care of their own business. Deals decreased more than 50% for this year compared to 2019.

• Delay in Deals: The time it takes to close a deal will take longer during this time. Everything that goes into closing a deal such as negotiations, due diligence, third-party consents, agreement terms, etc will take even longer to process due to the uncertainty of future variables.

• Impact on Letters of Intent: Buyers are now reviewing more documents for negotiating a deal, since the seller’s business might have been affected more financially during this time.

• Terms of Debt Financing to Fund Acquisitions: More questions will arise for financing deals, since buyers will be more protective of their investments.

M&A transactions generally take a long time to process since there are many things to consider from both the seller’s and buyer’s perspective. With the pandemic and the economic crisis affecting most businesses and industries, these M&A transactions will take even longer and some deals may not even go through at all.

Click here to read the full article

The Impact of the Corona Virus Crisis on Mergers & Acquisitions [Forbes]