Mergers and Acquisitions During a Pandemic

On both a national and global scale, the COVID-19 pandemic has had a major economic impact. From restructuring to closing shop altogether, businesses both large and small have had to make adjustments to reflect the new current normal. Globally, mergers and acquisitions have felt a true material impact of the coronavirus crisis. And while the world of M&A has certainly been able to bounce back from economic disaster in the past, the unknowns circling capital markets and business as a whole have put a number of acquisition plans on hold.

Contrary to historical economic crises like the 2000 dot-com bubble and the Great Recession, COVID-19 paints an interesting picture with a lot of factors to consider. Mergers and acquisitions deals need to reevaluate terms based on a number of new considerations. Some of the factors to take into account include:

  • Dealing financing, including pricing and availability
  • Due diligence in light of new ways it will need to be conducted
  • Additional time requirements that will be needed to complete things like transaction approvals and new regulatory obligations
  • Negotiating while working remotely, unable to sit in the same room
  • Which tools and technologies will be incorporated to account for new means of communication

Clearly, mergers and acquisitions deal making will be different from here on out. It is important for buyers and sellers to adjust accordingly and maintain a level of flexibility throughout each step of the process. Recent data points out that Q2 deal value saw an 83% drop for mergers in the U.S. compared with last year. As such, each and every deal must be approached with a degree of caution and meticulous attention to detail.

Here is a breakdown of where the U.S. stands in regard to M& A transactions:

  • Q2 2019: 2,895 deals value at $622.9 billion
  • Q2 2020: 2,064 deals value at $106.4 billion

On a global scale, there was a 52% decrease in volume in Q2, which spanned 9,129 deals. These numbers are significantly notable when taking into account the pre-COVID trends where consolidation was running rampant. So, deal makers are tasked with responsibility of looking at business valuations and business models in a post-COVID light and then take steps accordingly.

At Ellrich, Neal, Smith & Stohlman, P.A., our tax planning service goes far beyond filing a tax return. We assist new businesses with basic ownership options and tax consequences and guide growing businesses through year-end planning and projections. We offer a broad range of consulting services that include evaluating material transactions, mergers and acquisitions, international taxation strategies, and estate and trust planning.

Contact our Palm Beach Gardens or Miami office to learn more.