How COVID-19 Has Impacted Global M&A Activity

Oct 21, 2021 | Business Insights

Covid M&A activity

The world is a very different place than it was before March 2020. Now that the business landscape has changed, how has COVID-19 impacted global M&A activity? 

According to Refinitiv data, the total value of pending and completed deals announced in July 2021 had already reached $3.6 trillion year-to-date. In only 7 months, the M&A activity had already surpassed the full-year tally of $3.59 trillion in 2020. Additionally, the number of deals announced had already jumped 24% over the previous year.

It is becoming increasingly clear that professionals within the industry will have to change how mergers and acquisitions are performed going forward. But, how will the future of the industry look like? 

As with all disruptions to the established ways of doing things, the new way of doing business might require some painful adjustments at first. However, it will offer positive opportunities as well, provided people understand the coming changes and how to move with them.

Salesforce and Slack Acquisition
This July, CRM leader Salesforce completed their acquisition with Slack, the communication platform for businesses. The value was $27.7 billion.

Acceleration of All Things Digital

The COVID-19 pandemic accelerated the digital revolution that was already well underway before 2020. Society and business have recentered around being at home. The technology needed to support remote work, shopping, entertainment and other aspects of daily life is, therefore, more in demand than ever

This rapidly growing demand is conducive to buy-vs-build strategies for most companies, increasing competition for the necessary business infrastructure. Therefore, forcing high valuations. 

The Surprising Impact of COVID-19

The COVID-19 crisis has affected the global economy in quite an unexpected way. Large-scale economic shocks usually result in lower valuations. Yet, with the current crisis, the exact opposite has happened. 

Valuations have increased and there is heavy competition among investors searching for good deals. This is because available capital is abundant and global markets have rebounded better than anyone expected. 

Microsoft Event
Due to the impact of COVID-19, the amount of daily active Microsoft users almost doubled from 2020 April (75 Million) to 2021 April (145 Million).

M&A Activity & Global Valuations

Dealmaking has been on the increase since the second half of 2020 and there is subsequently a rise in competition. Because of the large number of deals taking place, it has become more challenging to determine an accurate valuation of individual global assets. This consequently has slowed the success of M&A activity around the world. Deal values continue to rise, with 56 mega-deals (deals valued at $5 billion or more) being concluded in the second half of 2020, more than double the number of deals in the first half of the year. 

Global M&A Industry Trends

Each sector has reacted differently to global trends. In the consumer markets, for example, retailers and FMCG groups have shown resilience. In contrast, there has been a growing demand for direct-to-consumer sales, the convergence of technology with in-store experiences, contactless delivery, and payment options. Active dealmaking continues in the health sector, which looks particularly robust. Nevertheless, many of these sectors remain in flux, and it remains to be seen exactly how they will settle once the effects of the pandemic recede.

Microsoft and Nuance Acquisition
Tech giant Microsoft acquired Nuance for $19.7 billion in April, with the goal of providing new cloud systems and AI capabilities across the healthcare industry.

In 2020, Opportunity Network itself recorded an 1158% increase in opportunities in the biotech industry. By September 2021, the activity had already surpassed by 39% over the (already impressive) number the previous year. Since the network connects 45,000+ CEOs and business leaders across 130+ countries, it provides a real-time pulse of worldwide trends — even before they hit the mainstream media. 

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