Global Insight evaluate how M&A bounce back due to the pandemic. Due to the lack of travel due to the pandemic, at first there was a tendency for the volume of transactions to decrease. By the end of 2020, there were very few of them. But, entrepreneurs began to look for ways to solve problems and by the first half of 2021 their number reached a record level. The amount reached $ 2.5 trillion.
Gary McSharry, Chair of the IBA’s Private Equity Subcommittee and partner at Irish law firm McCann FitzGerald says that ‘private equity funds became more active and CEOs got more confident’. This changes began to happen since September 2020, so M&A bounce back.
He also claims that it is not only a pandemic, but also Special acquisition companies (SPACs) – shell companies that list on a stock exchange to acquire a private company and then make it public without having to go through the standard initial public offering. They began to gain popularity and their role in m&a market increased.
Nanette Heide, a partner at leading US law firm Duane Morris and Vice Chair of the IBA’s Corporate and M&A Law Committee, notes that they account for trillions of dollars. She also says that now SPAC is being watched more closely, special attention is paid to securities, but this has not yet reduced activity in any way.
Сross border m&a deals
Already little by little adjusting to the conditions of the pandemic, trade began to grow in many sectors. Retail trade and travel are still actively purchased by distressed assets for future business growth.
Marco Rizzi is chair of the IBA’s Closely Held and Growing Business Enterprises Committee, and a partner at Swiss law firm Bratschi Ltd. In 2020, his international transactional practice was slow to roll out due to suspended transactions, but things are different now. He notes that he sees how it is actively implemented in other countries for recreation – France, Spain and Italy.
“You’ve got to recognise the danger but be alive to the opportunities of the crisis”Says Gary McSharry
Chair, IBA Private Equity Subcommittee, recalling what President Kennedy said when he referred to the Chinese word “crisis” which means “danger and opportunity.”
Nanette Heide notes that event now private equity funds have billions of dollars to spend even now. “It’s still a pretty “frothy” market, as the bankers would describe it’, she says. With regard to private capital, she considers the US government’s attitude to it to be “unfortunate” unfavorable.
Many sectors are now booming, with logistics, technology and consumer finance developing well. For example, Zoom is now the market leader, and many unicorn startups have taken their place of honor.
Gary McKshary talks about an increase in transactions in Ireland this year compared to the previous one.
He continues: ‘In Ireland, in the first half of this year, we’ve had over 106 deals, which is a 33 per cent rise over the same period last year. Ireland is well-versed in these matters and entrepreneurs have become the preferred jurisdiction for EU markets.”
Lithuania is also not far behind and together the Central Bank and specialists in the field have helped with the advancement in the financial technology sector.
M&A bounce back due to COVID-19
Covid has definitely changed the life of everyone on the planet. According to Mark Rizzi, firstly, the demand for the e-health sector has grown, the demand for the life sciences industry has increased, on the other hand, electronic technologies have been introduced into the lives of many.
The retail sector, in turn, has changed slightly as it is no longer just brick and mortar, and the website for sales needs to get better, so many have improved their technologies. Сross-border m&a activity now became very popular.
‘You need to become more adventurous in this new world.’ Hamzah, Co-Chair of the IBA’s Law Firm Management Committee and Singapore-based Regional Manager of the ZICO Law network, echoes this.
Covid-19, climate change, concerns about the environment – all this dictates new rules, and teaches us to adapt in a new way to faster processes, when everything can change quickly in just a year. The days of the five-year plan are over.
Signing deals in digital format, holding meetings by videoconference is no longer an innovation, but a new word in 2021. This rate is dictated and accelerated by the virus. The departure from the traditional office model helped to re-examine the productivity and work of people in general, and the quality of work and wages were assessed in a new way. Now it is easier to “go beyond geography” and “virtual maneuverability” has appeared. Thanks to technology, it has become easier to understand how much an employee actually works. If a person is valuable, he can work anywhere. No one is already so strongly attached to their place of work.
It is now easier for employees to move between projects, because earlier it depended more on geographic location.
With regard to the legal sector in particular – more and more law firms are inclined to keep young lawyers in place of work. Most of them see this as a huge benefit.
The value of young lawyers
The value of young lawyers in remote work conditions has increased significantly. Their technology knowledge and skills clearly dominate the background of senior staff.
Working remotely, people spent more time with their families, and there were no long commutes. Therefore, wages have become more adequate and now many people have begun to hear more often about higher wages for lawyers.
Even with the return of employees to the offices, telecommuting will now exist for many as a given.
This is highlighted by Marco Rizzi. ‘Going forward, we need to deal with people wanting to have some time working from home’, he says. ‘If you don’t give it to them, that will be affecting your attractiveness as an employer.’
‘You will always need a hybrid model in professional services’, says McSharry.
For example, many trainees literally tag along of many employees, listening to calls and also attending meetings. Implementing this model remotely is difficult. In fact, the practice of working remotely has already been introduced in the past, according to Rizzi, such an area was international transactions with small and medium capitalization. Even then, they noticed that connections were better in the early stages of video conferencing. DocuSign played an important role in the introduction of remote negotiations, for example.
Some commentators like Rizzi doubt that M&A bounce back for a long time. It’s just a way to park someone’s money according to him. As a result, the money, anyway, will need to be sent somewhere. In any case, for today global m&a market works great.
Private equity funds can be spent on startups, and the tech sector is booming. But who knows what heights m&a record will reach.
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