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Covid-19 coronavirus: confronting the unknown

The Covid-19 coronavirus pandemic is bringing the global transactions market to a near standstill with a sharp slowdown in dealmaking likely to persist until the public health crisis is brought under control. Even then, the market, and the motivations of investors, may look very different. 

During the record-breaking bull run in global transactions that began more than six years ago, it has at times felt like the M&A market had become impervious to external shocks.

Despite the mounting economic and geopolitical uncertainties of recent years, investors have remained remarkably sanguine, and markets, with some inevitable peaks and troughs, have stayed at or close to historic highs.

Although the question of when this extended cycle would end had increasingly nagged at the minds of market watchers, it had begun to feel like almost nothing could shake the nerves of investors who, buoyed by strong fundamentals, were often determined to carry out huge, highly strategic deals.

While all cycles do eventually end, few guessed that it would be one catastrophic event that would eventually drag the market to a sudden halt, but the onset of the coronavirus (Covid-19) pandemic has done just that – at least in the short term.

As growing numbers of countries move into “lockdown” to contain the spread of the virus, it is no exaggeration to say that the pandemic has, in just a few weeks, changed the world, and will potentially have a much longer lasting effect.

Navigating adversity

Its impact is felt most obviously in our daily personal and working lives and in the travails of companies across most sectors now struggling, at best, to navigate this period of unpredicted adversity and, at worst, fighting for their very survival.

This outbreak has also provoked the most intense volatility in equity markets since the Global Financial Crisis (GFC), with investors apparently unmoved in the early days by unprecedented interventions from governments and central banks to bring a sense of certainty in a time of deep economic insecurity.

In this environment, global M&A markets are expected to go into reverse after their longest ever period of sustained growth, with the likelihood that activity will remain minimal until it is clear the pandemic has passed its peak and some sense of real social stability has been restored. Data from 20 March 2020 already showed a dip of 18% in value, and a 16% decrease in volume from Q1 2019. As at 20 March, Q1 2020 was the weakest quarter since Q3 20041. However, it is clear that these numbers do not reflect the full impact that the pandemic will have on M&A activity.

Further analysis

See below further analysis of how the Covid-19 coronavirus pandemic is affecting global M&A and what lies ahead for the transactions market.

Covid-19 coronavirus: confronting the unknown

The Covid-19 coronavirus pandemic is bringing the global transactions market to a near standstill with a sharp slowdown in dealmaking likely to persist until the public health crisis is brought under control. 

Footnotes 
  1.   Refinitiv – note these figures represent deals announced between 1 January and 20 March 2020.