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COVID-19 Disruption and Impact on M&A Transactions & Deal Flow

Global M&A’s Disruption as a Result of COVID-19

The COVID-19 Impact on Global M&A 

The world continues to struggle with economic and financial challenges due to the coronavirus pandemic. The disruption caused by the virus has had a significant impact on global M&A deals, which can be categorized into three separate buckets: 

  1. Deals that have shown resilience and have been completed since the pandemic began
  2. Deals that have been paused or canceled
  3. Deals that are delayed with timelines being extended as a result of lockdowns, travel restrictions and market uncertainty 

Regardless of the categories your current deals fall in, the deal market horizon is still very optimistic.

A Notable Short-term Decline in Deal Flow

Under normal operating conditions, deal flow and managing the funnel of activity is the lifeblood of deal teams. The coronavirus pandemic has led to a decline in the volume of possible transactions that deal teams can consider. Faced with the market’s volatility, sellers seem reluctant to engage in transactions, even in the sectors which have not been severely impacted by COVID-19.

With a severe drop in seller-driven interest, deal flow has seen a notable decline/deceleration in recent months and according to an article written by Bennett Jones LLP titled ‘The Impact of COVID-19 on M&A Dealfllow’, M&A transaction levels could be expected to decline further. 

A Hasty Bounceback Could Occur

As of mid-June 2020, the deal flow uncertainty continues. However, the post-COVID-19 economy may recover very quickly once shutdowns are eased and some normalcy is regained. 

Stimulus packages from governments and central banks will aid recovery and so could private equity. According to an article published on Deloitte Insights titled ‘Opportunities for private equity post-COVID-19’, private equity firms are currently sitting on over $ 1.5 trillion USD of (ready to invest) dry powder which will help them keep their existing portfolio companies going while also allowing them to pursue other investment avenues. Lastly, companies that have been reasonably impacted by the pandemic may also recover swiftly by divesting their distressed assets or parts of their businesses to opportunistic buyers. 

Companies Need to Be Prepared For What is to Come

Surges of M&A deals and other transactions are expected across multiple industries post COVID-19. “We are beginning to see an uptick in data room subscriptions as companies and their investment advisors prepare for transactions,” stated Karen Perkins, CEO of Vault Rooms. “This preparation activity will separate the good from the great, and we’ve seen investors and buyers take note of that.” 

A key piece to this puzzle for companies will be to make sure that all their business-critical due diligence information is safely stored and ready to be shared with third parties such as investors, brokers, lawyers, accountants, banks, etc. Investing in a virtual data room during these times of uncertainty will provide companies with an additional degree of flexibility and efficiency needed to capitalize on the opportunities that will present themselves in the future.

About Vault Rooms

For more than 14 years, Vault Rooms has been an industry-leading cloud-based virtual data room provider, proudly facilitating tens of thousands of global M&A transactions across a wide range of industries. Business brokers, investment bankers, accountants, attorneys, private equity firms, and banks can safely collect, organize, share and track business-critical documents on the Vault Rooms platform 24/7/365.

About The Author

Karen Perkins is the CEO and Co-Founder of Vault Rooms, Inc. She is a troubleshooter, problem solver, and efficiency expert. Her career experiences have provided a broad foundation of skills that make her uniquely qualified to assist companies with their growth, transition, and operational improvement. She advocates for the use of simple and secure technology tools designed to make work and life easier with the Super S.M.A.R.T. Women platform. Likewise, her company, Vault Rooms, is a technology platform for the simple and secure sharing of business-critical files.