Factors like wide-ranging availability of financing and reduced interest rate in the last few years have led to a booming merger and acquisition market. However, the 2020 economic crisis has impacted many mergers but some mergers have remained dominant over others.
Data gathered Buy Shares indicates that United States mergers and acquisitions (M&A) stood at 149 in the first half of 2020. This figure was high compared to the total of other leading markets like the United Kingdom, China, and Japan. From the data, the United Kingdom was second with 31 acquisitions, followed by China and Japan which had 19 acquisitions each.
Elsewhere in the first six months of the year, France mergers stood at 18. In the Italian market, a total of 16 merger transactions were completed followed by Germany’s 15. On the other hand, Canada, Australia, and Indian businesses finalized 14,13 and 6 acquisitions respectively.
Accenture leads in consolidations
Our research also overviewed the most active consolidations based on the number of transactions as of June 30, 2020. From the data, Accenture leads with is consolidation at 21 followed by Dentsu with six. EY, WPP, each had four consolidations during the period under review.
Elsewhere, Perficient, Publicis Groupe, and Atos each registered three consolidations. IBM, Media Monks, Media Monks, Hakuhodo, Cognizant, Capgemini, and Tech Mahindra recorded two consolidations each.
Mergers and acquisitions (M&A) refer to the consolidation of companies or assets through various forms of financial transactions. The transactions entail mergers, acquisitions, consolidations, tender offers, purchase of assets among other aspects. Mergers and acquisitions are a very lucrative aspect of strategy, management, and finance in the corporate world.
Over the years, the US has enjoyed a growing M&A industry thanks to economic stability. Despite the ongoing trade war with China, the US economy was projected to grow before the pandemic. Many dealmakers saw the potential and initiated new mergers.
Globally, large to small firms, are acquired by competitors or enter into mergers with other businesses. Reasons behind the joining of forces can span from offensive strategies, such as boosting growth potential, deepening expertise in a sector or discipline. Some acquisitions are also categorized as defensive tactics like attempts to gain additional financial means to safeguarding financial stability.
During the first half of this year, the global economy collapsed due to the effects of the coronavirus pandemic impacting many acquisitions. At the same time, the pandemic presented opportunities for different sectors to align with emerging consumer behavior.
The impact of the pandemic on the M&A market
In the wake of the pandemic, it was anticipated that there might be reduced signed deals as different players take time to access and navigate the current global health crisis. Some deals might emerge in the coming months considering that some players had completed underlying due diligence processes.
Despite the United States posting the highest number of M&A deals, some agreements were put on hold while others were renegotiated or canceled. Mostly, big deals are the ones on hold as buyers await the economy to stabilize. Dealmakers are now focusing on businesses in need of rescues, restructurings, and potential nationalizations as governments attempt to stabilize economies. At the same time, companies have been moving away from announced transactions amid altered deal conditions and high levels of uncertainty thanks to the pandemic.
Elsewhere, regulators globally have tightened rules for foreign investments to protect domestic assets. In general, the pandemic has largely altered both the risk landscape and the diligence protocols for merger and acquisition transactions. The impact has been at every stage. For example, with existing or pending transactions, parties are now putting more effort into assessing their rights and contractual obligations, like the right to suspend performance or end the agreement. The health crisis will also impact the negotiation terms of transactions.