Fragile Global M&A Market Flashing Recovery Signals – S&P
(13 August 2020 – Global) The global merger and acquisition (M&A) market is displaying positive signs of recovery however further steps are needed before a material pickup in activity takes place, S&P reports.
With US bankruptcies on track to reach a decade high in 2020, it is becoming increasingly clear that the economic scars from the coronavirus pandemic will be deep. Nowhere is that clearer than in the M&A market, which was down 90.3 percent by value in the US during Q2. In Europe, banks and investors alike are struggling with a blanket dividend ban that is dampening valuations. Something Europe may have got right, however, is the environmental stipulations in the EU's €750 billion recovery package, which could be a boon for the green bond market.
During recent earnings calls, major investment bank (IB) executives noted how their clients' CEOs are starting to consider deals. But it is still unclear when that will lead to a meaningful uptick in announced M&A activity, which on a deal value basis was down 90.3 percent year-on-year in the US during Q2, according to S&P Global Market Intelligence's latest M&A and equity offering report. During the Goldman Sachs earnings call, Chairman and CEO David Solomon said deal talks between CEOs are more robust than they were in early May, and he expects that to translate to an increase in transaction activity over the next two to four quarters.
East & Partners detailed IB forecast series detailed CFOs valuable perspectives on upcoming ECM, DCM, M&A and corporate advisory activity:
- Investment Banking Racing Out of the Crisis
- M&A Deals Picking Up Among Chinese Corporates?
- Investment Banks Jostle to Win the European Recovery Race
Private equity (PE) could help increase activity. Financial sponsors on US sell-side deals have restarted discussions that were postponed because of the pandemic, and for buyers, financing has improved, especially for PE transactions.
“It is possible the M&A downturn is short-lived, but there is no way to know how long the cycle will last. We know we're three months closer to the recovery than we were three months ago. But we don't have a huge amount more clarity as to when that recovery will begin” stated Evercore Co-Chairman and Co-CEO Ralph Schlosstein on a recent earnings call.
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