M&A in the time of COVID and beyond
Legal Era|December 2020
What is clear for those engaging in cross-border M&A is that countries around the world are becoming increasingly protective of their economies and industries, with new rules being introduced and existing rules being more widely applied

M&A activity has long required those involved to consider whether the transaction gives rise to any competition or anti-trust concerns which may require approvals from relevant authorities. Cross-border transactions can also involve issues of foreign direct investment (FDI) limitations in certain jurisdictions. In the period following the millennium, barriers to cross-border transactions were generally reducing as globalization powered ahead, and cross-border trade, including M&A and joint venture transactions, became easier.

THE “GLOBAL FINANCIAL CRISIS” EFFECT

With the Global Financial Crisis in 2008, governments around the world were forced to bail out their banks.

Unlike the COVID-19 pandemic, the physical effects of the crisis were largely contained within the financial sector. For the rest of the economy, the consequences were felt mostly around the availability of credit and other forms of finance, although governments were left with huge debt piles to service.

Austerity became the buzzword when it came to budgeting. As governments sought to boost their economies, particularly through the mid-2010s, there was an increasing focus on retaining business within an economy and not outsourcing it to other, cheaper jurisdictions. This change in focus is illustrated by Donald Trump’s “Make America Great Again” slogan and Narendra Modi’s “Make in India” campaign, and the increasing tensions between China and other countries.

THE COVID-19 EFFECT

As countries were becoming increasingly protectionist through the tail end of the 2010s, COVID-19 emerged, and suddenly global supply chains were closed down. Businesses had to rapidly rethink their supply chains having been exposed to what had previously been considered a (very) minor risk.

Virtually all parts of the worldwide economy have been impacted by COVID-19 in one way or another, some positively (such as technology and communication) and others very negatively (such as hospitality and retail).

Governments around the world have extended unprecedented support to economies, severely weakening their financial strength just as the businesses on which they rely have been similarly weakened. This combination of effects has increased the concerns of governments around the world that opportunistic and exploitative acquirers will be able to acquire their domestic businesses and move them off-shore, further weakening the scope for future recovery as jobs and technologies are lost.

INCREASING PROTECTIONISM

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