By Suzy Bibko, Content Marketing Manager, EMEA
The pandemic has certainly impacted M&A across EMEA, with many deals abandoned or on hold. However, as we begin to emerge from the crisis, we are starting to see positive signs of recovery: face-to-face meetings taking place (at a proper social distance, of course), travel restarting, and deals ramping up or resuming.
Hopefully, this activity will be given a chance to prove itself and we won’t be forced into another lockdown any time soon. But what will drive actual recovery, both generally and specifically? And will there be lasting effects from our time in lockdown on M&A in the region, in particular with technology? We asked these questions to M&A and restructuring professionals at the different virtual briefings and webinars we hosted in the past five months. While aligned in many areas, there were some interesting differences.
Driving recovery: restructuring with a dose of optimism
When we asked M&A professionals for their thoughts on what would drive M&A market recovery, many countries were in strict lockdown and feeling the full effects of the crisis on their respective economies. So, it’s not surprising that most of M&A professionals felt that restructuring or optimism/consumer confidence was the way forward—we’ve all seen the headlines from around the world of the many companies employing the many different methods to stay afloat—which really is a positive step forward. As one practitioner said, “I think everyone is realizing restructuring is not a bad word and it’s a way to have a faster comeback and have the ability to succeed.” Moreover, as this crisis is different than the last, in that it has nothing to do with the financial system itself, optimism is indeed justified.
However, the outlier here was the Middle East: while restructuring ranked first, government stimulus/action ranked a strong second; for the other countries, this factor ranked much lower. Perhaps a cultural difference? After all, the region has a strong history of government stimulus and public-private partnership (PPP) arrangements. Or is it that the region has not been quite as hard hit by the crisis and is therefore in a different stage of the crisis than Europe? Indeed, many European countries have already passed the government stimulus phase and now are in the process of utilizing that government help to reach their end goal of ultimate recovery.
Restructuring: divestitures and debt-financing dominate
While restructurings are expected to drive recovery, there are quite a few different options available. Which will dominate? Divestitures appear to the be path forward across EMEA, followed by debt-financing everywhere except Central and Eastern Europe (CEE), where the more drastic measure of bankruptcy/administration/liquidation would be employed. The CEE also strongly felt (20%) that restructuring would not be important—the only region to give that answer any significant votes. Perhaps that is a direct response to the bankruptcy view: if things are so dire, other options are off the table, so to speak.
What’s interesting is that before the pandemic really took grip, practitioners from across the globe felt debt-financing would dominate, as revealed in our survey of 2,235 M&A dealmakers, The New State of M&A. Clearly, the pandemic has called for a rethink on restructuring.
Technology: complete alignment
While we have seen some regional differences regarding recovery and restructuring, there was complete alignment across EMEA on the role of technology going forward. The pandemic has taught us to adapt and even embrace technology; for most of us, it was the only way to connect with others, both for business and personal life. For M&A, what has been the most important aspect in getting deals done? The far and away winner was the ability to complete due diligence virtually or remotely.
This is also in line with global dealmakers’ views. The New State of M&A found that global dealmakers believe due diligence is the aspect of the M&A process that can most be enriched by technology, with accessing a virtual data room with AI and machine learning technologies accelerating the process the most.
Of course, this is great news here at Datasite, where we provide the technology that allows dealmakers the ability to market their deal and virtually and securely communicate, collaborate, and share sensitive data to prepare for the deal or execute due diligence, wherever and whenever. And we continue to add new innovations such as AI to Datasite to accelerate and streamline the M&A process in virtual world.