May 3, 2020
Given the current climate, it’s no surprise that merger, acquisition, and divestiture (MAD) activity, like most other non-essential activity, has come to a grinding halt. In fact, a recent Forbes article highlighted that ‘by the end of March 2020 (MAD activity) had reached a near standstill. M&A levels in the United States fell by more than 50% in the first quarter to $253 billion compared to 2019, but most of those transactions were entered into or closed earlier in the quarter before the crisis spread worldwide.’
As part of this global pause, many pending activities have been terminated as organizations are forced to redirect their attention, and their funds, to operational challenges brought upon by the pandemic. For the deals going ahead, factors such as deal terms, due diligence, availability, pricing, and deal financing will inevitably be impacted, as normal processes adapt. For example, crucial due diligence activities like spending time with senior management and key employees are rendered totally impossible as everyone is working remotely, and offices remain shut.
Like many other areas of the economy, MAD activity will not be put on hiatus indefinitely, and there are still opportunities present and deals pushing ahead. In this ‘new normal’, many organizations with closed, or ‘set to close’ deals will be looking to see how to proceed, and potentially innovate to side-step some of the complications that Covid-19 has placed in their way.
So what are some of the key challenges for organizations kick-starting MAD deals today?
As we move from the eye of the storm, into the landscape left behind in its wake, it is universally true that no business will be entirely unchanged, although the level of adaptation required will vary. While the climate for MAD activity is more challenging than ever, there will inevitably be movement in the market, favoring resilient buyers and featuring, unfortunately, desperate sellers. When it comes to communication, collaboration, and workflow management there is the opportunity to rewrite (some) of the rules and deploy innovative techniques to cross the remote team chasm, and push through in a highly adverse climate. This series on mergers, acquisitions, and divestitures will continue to track the ongoing impact on this industry, relevant news, as well as exploring pitfalls to avoid, and emerging opportunities and technologies to alleviate key challenges.
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