© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - THE COVID-19 PANDEMIC: Is This A Good Time To Be Pursuing M&A?
Posted 2nd October 2020

THE COVID-19 PANDEMIC: Is This A Good Time To Be Pursuing M&A?

Within any bull or bear market there are opportunities available for those willing to seek them out; and the current recession is no exception. Below are a few of our thoughts in answer to the question of whether it is currently a good time to be seeking to acquire or dispose of a business.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

THE COVID-19 PANDEMIC: Is This A Good Time To Be Pursuing M&A?
m and a

Jason Varney, partner at law firm Thomson Snell & Passmore

As with most people’s business calls these days, a recent conversation with a client turned to talk of the pandemic…and whilst the economic outlook does look rather bleak, our client asked us an interesting question: “is this a good time to be pursuing M&A?”

Within any bull or bear market there are opportunities available for those willing to seek them out; and the current recession is no exception.

Below are a few of our thoughts in answer to the question of whether it is currently a good time to be seeking to acquire or dispose of a business:

More opportunity

Many businesses would have needed to reconsider their strategy and business plans in light of the pandemic; and as a result, some companies would have decided to narrow their focus and/or build cash reserves. As a consequence, a number of directors will likely seek to divest of non-core assets and subsidiaries to focus on the more profitable elements of their business. Similarly, if cash flow is a concern, a divestment of an asset which is not core to the wider corporate group’s strategy may well provide the group with a much needed “cash” safety net.

Therefore we are likely to see further M&A opportunities entering the market in the not so distant future, which will then allow the divesting companies to focus their attention on profitability and, ultimately, survival.

On the other side of the fence, those businesses that are looking to grow quickly but are struggling to do so organically during the pandemic may see M&A (whether standard, distressed or pre-packed) as a viable route to achieve such growth.

Potential capital gains tax changes

It is rumoured that the Chancellor will seek to reduce the COVID-19 deficit by introducing changes to capital gains tax.

Although we do not yet know what the changes will look like, some shareholders may want to take advantage of the current CGT regime (including entrepreneurs’ relief) by exiting their companies before any of the Chancellor’s changes take effect.

This can provide a clear opportunity for those looking to expand and acquire new businesses given that (i) new assets will enter the market, (ii) M&A timetables will be accelerated and (iii) valuations may become more “realistic” given the need to complete quickly.

Company valuations

I mentioned above that the current market may prompt a change in the approach to company valuations. I recently joined a webinar hosted by a financial advisory firm who mentioned that COVID-19 is having an effect not only on EBITDA multiples, but also on the view of future profits; and with Brexit just around the corner, one can foresee that business owners may have to lower their expectations of what consideration they will likely receive for their shares.

These lower valuations are likely to prompt more interest from investors – and if the valuation is sufficiently low and the asset is particularly attractive, we will likely see more M&A auction processes being set up.

 

Capital

Following certain recent discussions that I have had with various investors (from venture capital to private equity) and Corporate Finance houses, it is clear that there is still a lot of capital in the UK market. Many of the investment directors who had to reel in their M&A activity at the start of the lockdown are now being told to get back into the market and look for opportunities to invest (which is certainly different to the approach taken during the last recession in 2008).

If you can therefore demonstrate that your business has clear growth potential and a good equity story, it is likely that investors and CF houses will be very keen to set up a “virtual coffee” with you – especially if the business has already survived (or even thrived!) during the first stage of the pandemic.

So, is this a good time to be pursuing M&A?

With more opportunities hitting the market, lower valuations, more investment capital available and the need to consider tax planning, this certainly can be a good time to pursue M&A.

One interesting development we have recently found in the current M&A market – perhaps as a consequence of investors and trade-buyers becoming more cautious than they necessarily would be in a boom market – is the increased eagerness to use earnout consideration structures (being, in summary, additional consideration payable to the business vendors if the company hits certain financial targets over a defined period of time). This eagerness is likely because investors and trade-buyers are perhaps more risk adverse during the pandemic and therefore see it as important that exiting parties participate in the risk.

Categories: M&A


You Might Also Like
Read Full PostRead - Eye Icon
NMC Health Acquisition of Stake in Clinica Eugin
M&A
Read Full PostRead - Eye Icon
Boralex to Acquire 25% – Wind Farm
M&A
03/11/2016Boralex to Acquire 25% – Wind Farm

Boralex Inc.confirms it will be exercising its option to acquire a 25% economic interest in the 230MW Niagara Region wind farm in which Enercon Canada Inc.

Read Full PostRead - Eye Icon
Rationality in Business  is Overrated
Strategy
29/05/2015Rationality in Business is Overrated

We hear from Kate Howe, Managing Director at gyro about why she believes emotions are pivotal to business success.

Read Full PostRead - Eye Icon
What is Compliance and Why is It Important for Business?
Legal
12/08/2021What is Compliance and Why is It Important for Business?

When you go into business, you are very likely to quickly encounter the word “compliance”. This is something that you are going to have to follow extremely closely, no matter what. Compliance in business is something that just can’t be ignored. Let’s t

Read Full PostRead - Eye Icon
Driven by Success: Auto Europe Group – Imad Khalidi CEO of the Month: USA
Leadership
05/07/2016Driven by Success: Auto Europe Group – Imad Khalidi CEO of the Month: USA

For over half a century, Auto Europe has been a leader in worldwide car rental services.

Read Full PostRead - Eye Icon
Gemfields Acquires  Montepuez Gem Licenses
M&A
02/04/2015Gemfields Acquires Montepuez Gem Licenses

We caught up with Ian Harebottle, CEO of Gemfields, to find out how his company’s acquisition of mining and exploration rights at Mozambique’s Montepuez ruby deposit is set to change the global ruby trade forever.

Read Full PostRead - Eye Icon
The Role of DevOps in Cloud Application Development
News
26/07/2024The Role of DevOps in Cloud Application Development

DevOps is a software engineering practice that is ideally suited to the demands of cloud computing. In a DevOps environment, developers work closely with IT operations and other cross-functional teams to streamline the software development lifecycle. This coll

Read Full PostRead - Eye Icon
How to Improve your Chances of Being Eligible for a Claim
Legal
16/05/2023How to Improve your Chances of Being Eligible for a Claim

You have a chance to claim back hundreds or even thousands of pounds if you have ever been overcharged or mis-sold financial products. 

Read Full PostRead - Eye Icon
Wesco Aircraft Acquired by Affiliate of Platinum Equity, Combined with Pattonair at Closing
M&A
13/01/2020Wesco Aircraft Acquired by Affiliate of Platinum Equity, Combined with Pattonair at Closing

The combined company, which will be headquartered in Valencia following closing, becomes a $2.4 billion business with a global footprint in 17 countries and more than 4,000 employees. The combined company will serve more than 8,400 customers, including many of



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have 14 unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow