Covid-19 Insights: International M&A, Private Equity, and Deal Structuring (Part 1)

  • Current Status: The last several years have seen a boom in international M&A, private equity investments and overall domestic and cross-border deal flow.Based on the amount of deal flow and structuring in the first quarter of 2020, it appeared that this year’s numbers would far exceed the previous year’s numbers. However, the COVID-19 outbreak caused a significant drop off for the amount of international M&A and deal structuring for the foreseeable future. Several of the deals that were supposed get done in April have been either pushed back or outright cancelled.The few sectors where this has not had a significant impact are in the healthcare (tele-health, medical devices and life sciences), technology and supply-chain sectors.
  • Longer-Term Concerns: The worst case scenarios we are looking at are the trend lines the following sectors: Real Estate, Hospitality (hotels & restaurants), Airlines, Shipping, Retail and Service Industries. We are already noticing a major uptick in bankruptcy filings across these sectors.
  • Noteworthy Aspects: We think that this may be a significant opportunity for more consolidation and acquisition of distressed assets in the various sectors.We believe many foreign acquirers will be even more active in the coming months since this will provide them with an opportunity to obtain market share or even more market share in the U.S.
  • Important Variables: We are closely monitoring the various Federal Government bail-out packages for individuals and small businesses.We are also tracking the potential bail-out legislation for various industries such as airlines, hospitality, etc. The other major factor obviously is how the various nations are handling COVID-19 and in the U.S. how the states are coordinating with the federal government regarding the COVID-19 response.The silver lining is that more and more coordination is being done remotely and this may become the norm even after COVID-19.
  • Analyst Assessment: There are various thought processes on where the U.S. economy and the world economy will be in the first quarter of 2021.There are various reports by WHO, Goldman, Bloomberg, etc.There is strong indication that the U.S. economy could be in a deep recession in 2021 but we need to track legislation and the moves by the Fed to hopefully counter this.There is also a major factor of the presidential elections in early November, which could also significantly impact the economy.
  • The Ones to Watch: Since the president invoked the Defense on Production Act, there are several companies in the various sectors such as automobile, manufacturing, and supply chain that are restructuring and producing and manufacturing COVID-19 related products to assist with the production and supply chain management issues.There are several organizations (private, public and academic)working collaboratively across all geo-politics to come up with various solutions for COVID-19 from vaccinations, to PPE, to heath care management, etc.
  • Personal Note: We are working with the state government in Connecticut for a client that has the technology to improve tele-health solutions across the U.S.There are very state-specific tele-health regulations and the various issues with HIPAA, etc. to address.We are assisting our client in navigating this gray along with the state government to provide state of the art tele-health solutions not only for Connecticut but for U.S.Finally, I do believe that C-19 has brought not only Americans closer together but the whole world, as we now really understand how truly inter-connected we all are.

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McCombs Center for Global Business develops and supports internationalization and global business education. Visit us at www.mccombs.utexas.edu/CGB for more.

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CGB News & Insights

CGB News & Insights

McCombs Center for Global Business develops and supports internationalization and global business education. Visit us at www.mccombs.utexas.edu/CGB for more.

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