As we head into the final weeks of 2020, perhaps we see the faint glimmer of light at the end of the tunnel, with several promising steps being made towards effective COVID vaccines, the US election (perhaps?) out of the way, and Christmas on the horizon. Phil Edmonds reflects on some of the lessons learnt in a turbulent year, and the trends in the mergers and acquisitions market we can look forward to continuing in 2021 and beyond.
1. Putting the 'M' back into 'M&A'
While we might all know it as 'M&A', most of the work on any M&A adviser's desk is firmly in the 'A' category - whether it's a big bold takeover, a softer landing for a target in the cosy confines of a larger rival, or a transformative management buy-out - the record books will show 'an acquirer' and 'a target'. A big shark and a little fish.
But after years of A with precious little M, we're seeing businesses ask themselves, and crucially each other, whether clubbing together for a greater collective benefit might be a better use of their efforts and resources - be that in the form of a joint venture, a partnership, or simply two businesses of roughly equal size coming together to form one larger, robust and efficient operation.
2. Video calls from the kitchen table are here for good
And I'm all for it - not because it means I avoid rush hour in Bristol, but because in this 'new normal' we're finding that there's more communication between parties in the midst of transactions, and that that communication is more open, more natural, and more productive. Counterparties aren't in their bunkers - whether it's Teams or Zoom, the 'all parties' calls we're used to are becoming less partisan. Maybe there's just something disarming about having paintings on the wall and kids shouting in the background (sorry to anyone who's had to endure a call with mine tearing around).
Ultimately, a lot of M&A work comes down to relationships, and the shared pain of an occasional stuttering broadband connection seems to go a long way.
3. Easy paper trails
I was talking to someone in a digital records team in the NHS who says that the pandemic condensed 8 years' worth of developments into about 8 months. A rollout of Teams that was going to take to the end of 2021 happened in just a week.
Obviously, those are extreme examples, but the fact is that whether we realise it or not, we're all benefitting from the enforced changes to old habits - whatever your equivalent of stuffing a document in a filing cabinet and never looking at it again happened to be before COVID, I bet your processes are more resilient now than they were then.
The benefits in an M&A context are obvious but the trick will be in keeping our inboxes, our document repositories, our calendars, our processes, and our backups, in good shape going forwards.
4. Necessity, the mother of invention
Whether it's your favourite lunch spot selling veg boxes, metal fabricators coming up with gadgets to open doors without touching them, or businesses previously resolute in being 'in person' finally embracing online trade, businesses in every sector have been taking the chance to reassess, refine and refocus their offerings. Maybe some of those changes will prove to be temporary, but even if they do, they're a proof of concept - that investing time into taking stock (metaphorically speaking, if not literally), and reflecting on what we're all doing, can bring lasting benefits.
I expect that for many businesses, it won't take a global pandemic to prompt the next examination of what they're doing, how they're doing it, and with whom. For some businesses, that may mean a step into the M&A market, and if and when that happens, those businesses with the vision to see them will find an ocean of opportunities out there.
5. Acquirers keep Acquiring, Lenders keep Lending, and Sellers keep Selling
That's right: after an initial period of adjustment, the market has begun to rebound and - in terms of transactional throughput, investor confidence, and deal values - this feels much like any other Q4, despite the altered surroundings for many of us. If anything, there's perhaps an even greater sense of focus around the market and determination to get deals done, without fear of the market collapsing around us, whatever the future may bring.