Impact Of The Health Crisis On Mergers & Acquisitions

Pursant traditionally starts finalizing its view of the previous quarter's deal environment 30 days after a quarter ends, when there is more clarity of data and greater visibility into what is to come. However, due to uncertainty, with zero visibility into the state, direction or pace of deals, Pursant spent April and May processing the impacts of the health crisis on M&A and the recession to follow.

The conclusion is that while there are normally winners when the market turns, there were very few winners resulting from this crisis. However, as we now move to the back side of the pandemic, we see that the chess board has been reset with parties that stand to gain from the new market. In regard to future predictions, Pursant sees fatigued business owners becoming motivated sellers, and borrowing costs for deals will remain low, but we will see more conservative M&A borrowing behaviors.

Here are a few more top takeaways from Q1 2020:

• The pandemic and its macroeconomic impacts have triggered a shift from a prolonged seller-favorable cycle to a period that is neutral to buyer favorable.
• For the first time in nearly a decade, we are seeing the shift away from a seller's market.
• The macroeconomy has officially entered a recession phase and, with that, all of the drags on business will come into play for most sectors. This will result in an increase in the number of distressed company acquisitions.
• M&A volume is expected to return in late Q3/early Q4.

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