M&A Recovery in Full Swing
(19 October 2020 – Australia) As COVID-19 appears ‘here to stay’ in the short term at least, Australian merger and acquisition (M&A) sentiment is strengthening as the health crisis forces enormous change across key sector verticals and customer behavioural preferences.
As of Q4 2020, M&A activity is catching up to the stellar run-ups in initial public offerings (IPOs) and capital raisings underpinning record ECM volumes year to date. M&A volumes in Q3 2020 equaled the entirety of H1 2020. The recent private equity (PE) bid for Link Group and OptiComm buyout are key examples of major deal flow building.
A key challenge is the practicalities of deal making in a socially distanced world, an area of specific focus for the upcoming E&P Global Insight Report as relationship banking endures a step change. Deal teams have been creatively using technology but it’s not quite the same. Goldman Sachs anticipates that the current pressing obstacles will be surmountable as the health crisis eases and economies continue to reopen yet major ‘second wave’ coronavirus infection rates as the northern hemisphere approaches winter heightens uncertainty.
“There are still some more intangible benefits that you can get from being in a room with someone, or walk a site with someone. While M&A all but stopped during the peak of the pandemic panic between March and June, the September quarter brought a solid rebound. It does feel as if things have really shifted” commented Goldman Sachs' Head of Mergers and Acquisitions, Marissa Freund.
“There’s been a real uptick in activity, but there’s also an uptick in sentiment and confidence as well. Valuation is still a hard exercise in this environment, but I think we’ve been in it long enough that we have a sense of how to operate” Freund added.
“Boards are seeing an increasing role for M&A as they come to appreciate the pandemic is presenting a very different challenge from the liquidity shock of the GFC. This is very different. This is a great acceleration and far more fundamental, both in the shock to business models and industries, and to the way consumer behaviour is shifting. That cues up the role of M&A. How do I use M&A to change lanes?” said McKinsey Partner, Ben Stretch.