DLA Piper has launched a report called Global M&A in times of COVID-19: a tale of distressed assets, risk mitigation and deal disputes, which was created based on data gathered from transactions carried out by our clients all over the world. In short, the report tells the story of sectors that are attractive during the pandemic, risk mitigation, distressed asset transactions, and post-transactional disputes.
According to the report, most acquisitions are still majority shareholding acquisitions, but there is an increase in the buy-back of minority shareholdings, especially when buyers are aiming to reduce costs and to mitigate risks at a time of exceptionally high economic uncertainty. For particularly attractive assets (e.g. certain pharmaceutical and technology companies), DLA pier has seen highly competitive auctions, involving a large number of bidders that are ready to act very quickly. The transactions largely reflect the pandemic-driven development of selected sectors of the economy, with technology being the main contributor, followed by food and drink and e-commerce.
It is expected that there will be a significant increase in distressed asset transactions as companies lose the protection and subsidies offered by governments. The next year may therefore be characterized by such transactions. There is an overwhelming expectation that the pandemic will lead to an increase in post-transactional disputes. In more than 60 percent of the countries covered by the report, the initiation of post-transactional dispute proceedings has already been observed.
“We saw a major slowdown in Q2, when many businesses were more focused on survival and adapting to the unique situation at the beginning of the pandemic. The market definitely picked up after the summer break, fuelled by recalibrated price expectations and a record level of capital for investments held by private equity firms and available debt financing. But it’s a two-speed market. Attractive companies from the so-called distressed assets pool that are put up for sale quickly find buyers who are looking for investment opportunities, while other transactions take longer and require more negotiations than before,” Marek Sawicki, partner, head of private equity and co-head of corporate/M&A in the Warsaw office said.
(WBJ)