August 27, 2020

M&A Market Insight HY 2020

Welcome to our M&A market insight for the first half year of 2020. These are certainly challenging times for everyone, and we hope that you have managed to stay healthy during the recent months.
The M&A market has without a doubt been hit by the Coronavirus pandemic. However, we have experienced that despite the general uncertainty, there are still enough funds and liquidity for the right investments and also many new opportunities have arisen.“

Global M&A deal development
by volume and value

Western Europe Top 10 Industries
by volume

Global Market Split
by volume (%)

  • In total, more than 43k deals worth a combined USD 1,746b were announced worldwide over the first half year of 2020. Without a surprise, both volume and value declined as the Coronavirus pandemic resulted in an activity-level drop in many sectors. Volume is down by 18% in a year-on-year comparison.
  • Despite experiencing a year-on-year value drop of 60%, the US was still once again the most frequently targeted country, with 9,414 deals worth an aggregate of USD 382,260m. It was followed by China and the UK in terms of both volume and value. However, no Chinese deal featured in the top 20, while US companies were targeted in seven.
  • UK numbers were fuelled by this year’s largest transaction, being valued at USD 38,714m: a merger between UK telecoms giants Virgin Media and Telefonica Europe (o2 UK).
  • Strong drops in value underline that big deals struggle while the mid-market remains somewhat resilient. Despite declines across all sizes of deals, large deals suffered the most. Transactions of USD 2b or greater declined by nearly two-thirds quarter on quarter in 2Q20. Several high-profile deals fell victim to the downturn, such as Xerox’s USD 35.5 b bid for HP and Walmart’s divestment of a majority interest in UK-based Asda.

Sources:  Bureau Van Dijk 2020; Mergermarket 2020

The current Covid-19 crisis has had a fairly negative effect on almost every sector, including M&A activity. Yet within Europe, specifically the DACH region, the small & medium sized (SME) sector has shown comparatively more M&A activity. This trend is likely to continue, given the region’s pre-Covid economic strength, the current fiscal and monetary stimulus, and its lesser exposure to the tourism industry.

Private equity has secured liquidity and they have a lot of dry powder, as the bull market of the previous years brought high valuations, forcing them to carry out fewer deals. Thus, they have been very active throughout this crisis and are expected to keep the level of M&A activity in the near term.

Experience shows that crises lead to more movement in the transaction market, so unless we see a drastic increase in Coronavirus cases (second wave) which would lead to a new lockdown situation, Q3 & Q4 2020 should see a rebound going into 2021.

Winners have been the software, online retail, healthcare and pharmaceutical sectors, which have all seen a rise in the number of deals throughout the crisis. This is likely to continue in the near future.
Consumer, I&C and financial sectors have been hit hard, which could lead to a pick-up in M&A transactions throughout Europe.

Spanish corporations had increasing international ambitions even pre-Covid, with greater interest in the Western European market, especially in DACH and also in the CEE regions, which account for particularly strong Industrial & Chemical (I&C) sectors.

Sources: Handelsblatt (2020); Dealsuite (2020); Bureau Van Dijk (2020); Mergermarket (2020)

Opportunities as a reaction to the pandemic 

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With passion for M&A,
Your SAZUN Team