Deals will reshape industries in the time of COVID-19

Crisis creates business opportunities. This time, M&A activity will lead the way, and buyers will be in the driver’s seat.

- Alastair Rimmer, Christopher Temple, and Will Jackson-Moore

Relationships matter, which is why the deals world revolves as much around chance conversations as it does scheduled meetings and planned strategic maneuvers. COVID-19 has changed those serendipitous encounters and the get-togethers that help dealmakers build trust. That said, the dealmaking machinery is far from idle. Despite a lack of physical meetings, deals are still going ahead. Ten-hour videoconferences aren’t unusual. Site visits are a challenge, but drone technology presents a reasonable solution. Cosmetics firm Coty, which was looking for buyers, said it was considering the use of drones for due diligence; in May 2020, it sold its Wella and Clairol brands to U.S. investment giant KKR in a deal worth US$4.3 billon.

The strategic rationale for seeking a deal hasn’t changed and everything companies have always needed to complete a transaction is still in place, but the priorities have changed. As businesses emerge from lockdowns due to COVID-19 and debt markets reopen (and as we observe the surge in big companies raising money through corporate bonds), the types of deals we see and the reasons behind them are likely to reshape industries. The pressures of the economic downturn and the need for many companies to restructure their balance sheet will create opportunities. But both buyers and sellers need to be aware of the challenges of executing long-term strategies under short-term pressures.