Introduction:
2020
has gone down in history as one of the worst years for global businesses, and
as a result, it affected economies worldwide. The COVID-19 outbreak caused even
economies of scale to tremble and topple, and therefore translated to one of
the worst-hit years for the market after the ‘Great Depression of the 1930s.
It
is no secret that this year saw a massive slump in mergers and acquisitions as
well, not just across Dallas or the States but across the entire world.
According to a reputed m&a
advisor Dallas, the Corporate
Deal Tracker from the Texas Lawbook reported a 30% decrease in transactions.
This was accompanied by a 20% drop in value compared to what went down in 2019.
As a result, there were 429 m&a transactions across the entirety of Texas
in 2020 compared to 623 m&a transactions that occurred in 2019.
The broad reasons for the decreased m&a transactions
in 2020:
According
to the advisors and specialists spread across Dallas, a couple of reasons led
to the dismal financial year for mergers and acquisitions.
● The
COVID-19 pandemic:
It
can definitely be touted as the most apparent reason for the slowdown of
mergers and acquisitions. Since several companies and organizations closed down
owing to the lockdown and quarantine-induced recession, mergers and
acquisitions became a long-drawn prospect. For more prominent companies that
looked to acquire the smaller enterprises and ensure their operation, cash flow
became a big issue amid the COVID-19 pandemic.
With
fewer financial resources, it would be an insurmountable task to acquire
smaller enterprises and breathe life into them. Mergers also seemed to be a
distant prospect if the component enterprises would not have the means to complement
each other and continue a combined workflow.
● Uncertainty
about the future:
For
the few companies that actually steadied their ship amidst the unprecedented situation, uncertainty about the future in an economic downturn was a significant cause for brows to be furrowed. The future of retail, travel and
tourism, energy demand, manufacturing and production, and almost everything was
in question. Hence, the organizations that continued functioning lost a lot of
their steam and had to tread very carefully.
Prospects of m&a transactions in the immediate future:
However,
according to some of the best m&a advisors, the good news is that 2021
seems promising. Although the scare of the COVID-19 pandemic is far from over,
with new mutated variants emerging by the day, the industry experts predict
that 2021 will be overall a better year for business owners to sell their
businesses or acquire new ones. They believe that if business owners follow the
trends of 2020 m&a transactions and follow in the footsteps of some of the
better deals that transpired, they can make a fortune out of them in 2021.
Some of the better deals that transpired in 2020 in the
m&a sector in Dallas:
The
Dallas Fort-Worth area witnessed only 43 m&a deals in the second quarter of
2020 that coincided with the middle of the lockdowns. On the contrary, there
was an appreciable rise in numbers in the third quarter, which saw 63 deals in
the same area. Dallas Fort-Worth was even tied at the number four spot with Los
Angeles based on the m&a deal counts and put a lot of big cities like
Washington DC, Chicago and Atlanta behind.
●
The
entire healthcare, biotech, and life sciences sector dominated the m&a
transactions and consolidated its position with some exceptional deals that
went down throughout 2020. This was propelled by the need to find the cure to
the COVID-19 pandemic and the innovations required to create the vaccine.
●
The
latter half of 2020 saw some of the most illustrious deals in the energy sector
that had looked quite pale before this period. Some of the sterling m&a
deals included the much-awaited consolidation of Chevron/Noble Energy worth USD
5 billion. The next was the merger and acquisition of the hydrocarbon experts
Concho Resources by the largest Alaskan crude oil producer ConocoPhillips for
USD 9.5 billion. It led to a flurry of other energy deals like the purchase of
QEP Resources at USD 2.15 billion by Diamondback Energy of Midland.
●
ITeS
and the digital economy soared amidst the pandemic. The shift to the ‘new
normal’ witnessed several mergers and acquisitions in the sectors of
productivity tools, SaaS, communications technology, and even online dating
platforms.
With
the help of the right m&a advisor
Dallas, any business owner can partner with the right company to set sail
in his business aspirations. These advisors have years of experience under
their belts and could be the driving force behind such top-tier deals.
Macroeconomic factors at play:
Along
with the m&a deals that have already started emerging since the latter half
of 2020, several macroeconomic factors affect private companies and influence
how they would fare in 2021.
K-shaped recovery:
According
to economists and industry pundits, the post-recession period of 2020 has
witnessed a ‘K-shaped recovery’ curve amongst businesses. While businesses in
the sectors of physical retail, oil, and natural gas, travel and tourism, live
entertainment and services like malls, restaurants, and eateries suffered due
to the lockdown and quarantine measures, other players encountered a windfall.
These
businesses that benefited from excessive user adoption and increased revenue
were:
●
Telehealth
● Cybersecurity
●
Delivery
and logistics
●
Warehousing
●
Ecommerce
●
Digital
entertainment
●
Cloud
infrastructure and
●
Video
games.
Since
the stock markets do not always align with the real economy, 2020 saw it
recovering quickly and reaching record highs, thereby boosting confidence
amongst consumers and reinforcing their spending patterns, which led to
increased revenue.
Low-interest rates and government loans:
With
low-interest rates, every business can consolidate its position and aim for
better growth by earning more from operations, expansions, and inventory while
earning substantial profit after paying its premium.
With the increased government stimulus funding, loans are becoming easier to obtain.
Thus, private organizations can look for mergers and acquisitions with a
renewed vigor.
Conclusion:
2021
has been witnessing vaccination drives across the entire world. But with the
emergence of newer viral strains and several roadblocks in the path of
vaccination attempts, there is still a long way to go before achieving a 100%
successful vaccination rate. Hence, the k-shaped recovery curve will dominate
the m&a space, with companies that have benefited from the change in
consumer habits likely to be seeking m&a targets. In contrast, those
reeling from the after-effects of the 2020 economic slowdown need to measure
their steps before treading.
read more: How Important is it to Have a High Credit Rating?