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Will COVID-19 turbo-charge M&A and transformation?

Pandemic-fueled strategic reviews are underway, as companies plan for a postCOVID-19 world. For many CEOs and other business leaders, the emergence of the COVID-19 pandemic, and its resultant economic shock, posed an existential threat to their business.

It is no surprise that more than 86% conducted a comprehensive strategy and portfolio review in 2020. For two-thirds (66%) this was unplanned — a direct response to changing events.

Understanding the impact of the pandemic and investing in technology and digital will support companies’ strategic growth agendas. The focus of these reviews is to better understand and manage the longer-term impact of COVID-19 on their business and sector. Many aspects of the change wrought by the pandemic remain unclear. In “normal” times with anticipated ups and downs of the economic cycle, business models remain relatively stable. Directions are usually clear, and no major changes are required. In a period of extreme and unique disruption, the interruption has been a threat to the fundamental business model.

The M&A imperative to accelerate strategic transformation has sustained the desire to do deals, despite acute uncertainty.

It has been an extraordinary year for M&A. Global dealmaking virtually ground to a halt in the second quarter as the pandemic hit. Companies were more focused on navigating new and immediate uncertainties of business continuity than on doing deals. But since July, there has been an acceleration of acquisitions. This trend is expected to continue, as companies position themselves for the upturn in economic activity and a changed industry landscape. The second half of 2020 was the strongest on record, with value more than doubling between the first and second half of the year. Conditions for M&A remain supportive, including low interest rates, accommodative capital markets and abundant private capital.