April 02, 2020

How can Technology enable M&A in a World with COVID-19?

In early 2019 we began paying close to attention to the technology, media & telecom (TMT), industrials, and healthcare sectors.

During our second annual TMT M&A Spotlight webinar in September, we ask hundreds of dealmakers about their market outlook for the TMT sector and 47% said it is heading in a positive direction, while 42% had a neutral outlook.

 

TMT, Industrials and Healthcare Leading M&A Deals

Over a period of four months ending in January, we saw M&A deals in TMT, industrials, transport & defense (ITD), and life sciences & healthcare as the top 3 sectors in terms of deal volumes among our clients across the globe.

This trend is consistent with Mergermarket’s worldwide M&A deal flow data, as reported in the recently published Deal Drivers FY2019 reports for the Americas, EMEA and APAC. It is particularly evident in the western US, UK & Ireland and DACH, and North Asia & Southeast Asia based on potential companies for sale.

 

Technology Drives M&A

We also saw a notable increase in TMT deals in January. With media powerhouses, telecom tie-ups and technology, the great disrupter, defining this sector-of-all-sectors, it is not surprising that Mergermarket’s analysts expect that TMT will see the highest level of M&A activity worldwide in the first half of the year.

Based on our survey with dealmakers, 37% say technology will spur the most M&A activity in healthcare, while 26% and 21% think it will mostly be in TMT and financial services sectors, respectively.

Our CEO, Rusty Wiley, discussed how technology is impacting businesses in the TMT sector and beyond, in this regular Forbes column, noting that “As transactions involving technology continue to grow, companies should also prepare themselves for down-cycle spinouts and divestitures.”

Wiley also added that: “Technology's use and investment can not only alter the scale and nature of a company's business operations, but it can also future-proof a business and increase its potential sustainability. Successful companies can and should be able to navigate both of these outcomes.”

 

Datasite Insight: COVID-19 and M&A

Just 6 months ago, 39% of dealmakers we surveyed believed that political uncertainty could potentially sink TMT deals, while 23% expected it will be caused by anti-trust/competition challenges. However, a lot has changed since then due to the COVID-19 outbreak.

In a recent article on the impact of the coronavirus on M&A and private equity, Wiley said: “the outbreak is continuing to affect travel and events and in some instances, it’s caused some government offices to shut down. All of this may cause delays in closing deals or completing the due diligence process, which typically takes between three to six months to complete.”

COVID-19, which the WHO officially declared as a pandemic on March 11th, is having an unprecedented impact on markets worldwide. Technology is now more crucial than ever for M&A activities and communications -- from asset marketing to due diligence -- to continue despite all the lockdowns and uncertainty.

 

 

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