As the Covid shock settles, fundamentals of successful dealmaking will return.
Not surprisingly, mergers & acquisitions (M&A) activity has slowed down since the Covid pandemic started. Many deals that were in the pipeline during the first half of 2020 were put on hold to allow management teams to focus on cash preservation and ensuring their businesses could survive through the extended lockdown.
Sellers have been hesitant to come to market in this economic environment, assuming that buyers would be scarce, according to Mike Donaldson, CEO at private equity company RMB Corvest.
"Business performance has been knocked by Covid, so sellers have wanted to wait for earnings to improve, resulting in a low volume of quality opportunities in the market."
Not only have earnings been affected by Covid, says Donaldson, but because the economy is still recovering, it's hard to forecast future earnings, making valuations and sustainable earnings tricky for investors.
He says deals are taking much longer to execute and conclude due to the lack of interaction and access. "Good dealmaking is an art. not a science. and the face-to-face interaction between a private equity team and management team is absolutely vital."
