2020 CFIE M&A forecast and the impact of the COVID-19 virus

Normally, I don’t write about subjects that have political aspects. More importantly, it is difficult to compare business issues to a viral outbreak that is a human tragedy for those infected and their loved ones. I also must admit that I am not at all an expert in the field, have no experience as a microbiologist and can’t predict the views or ideas of the wider population. In this article, I mainly want to get an idea about the thoughts of the M&A community on the impact on our profession. I am interested in your opinion to see what we can expect later this year in regard to M&A activity. Hence, this article will be concise.

Still, I think it could be important for us to prepare and get some idea of what might be coming. Will it mean that we get a similar slow period as during the financial crisis with the number of transactions significantly down? Or will the spring and summer clear up the virus and get us back to ‘business as usual’? Which industries are affected, and which ones will have a limited impact?

Contents of this article

The main objective is to get input from the M&A community on what the effect of the COVID-19 virus will be on the European M&A market

Which industries are most affected?

Discuss your strategy to cope with the new market expectations

What are your expectations for 2020 in regard to the number of transactions and clients’ plans?

So far, I have had 2 projects that are affected, one in the e-commerce industry where many products are manufactured in China. Another one in car rental and distribution where the potential buyer operates an airline and car rental business, so they have other priorities at this moment. If we can share our thoughts on the effects for the 2020 M&A market, we might all still benefit from it in one way or another.

Input from the M&A community regarding the effect of the COVID-19 virus on the European M&A market

Once again, I want to stress that the effect of the virus on the health of especially the elderly or sick people is what matters most. In that sense, it might not be so concerning if we as M&A advisors, need to take some steps back and spend less time working for a few weeks or months. At the moment, I don’t see such an impact on most of my clients. However, how long will this last? What is your current experience in your daily jobs and the feedback of your clients about their M&A plans?

Which industries are most affected?

I am working on a project in IT (software development) where I see no impact at all. Software development and design are still a growing activity and both my client, the buyer, and most targets I come across are growing their revenue and seem to be doing well. I will soon start a buy-side project for a large forwarding acquisition in Europe and would expect that some of the potential targets have had some impact from the virus. I hope the numbers still stay attractive enough in 2020 to encourage them to discuss a potential sale. Of course, the travel and tourism industries are heavily affected. For a pharma and healthcare buyer, I see a substantial effect on some of the targets we speak to. A few are economically positively affected and are very busy with demand for their products because they supply products that are required in this crisis. Hence, they hardly have time to attend calls and are focusing on the current business above M&A projects.

What is your strategy to cope with the new market expectations?

Do you expect the demand for M&A services to decrease later this year? Does the current situation have an effect on your hiring plans for later in the year? Do you look at potentially cutting costs or is it maybe a good time to invest a bit more in marketing?

Personally, I have not really thought about this and I don’t think it should influence my personal planning. I think CFIE has a good set-up and is relatively well-positioned for the future. Another question might be if regular travel and face-to-face meetings are always required? Does video conferencing offer a good second alternative? Is all the travel we do necessary in the first place?

What are your expectations for 2020 in regard to number of transactions and clients’ plans?

As for me, I don’t expect much good out of this crisis in regard to M&A. Potentially, the remainder of the year will bring fewer transactions than we would have seen otherwise. Of course, most of us depend on a few transactions per head per year anyway. Hence, the year can still be good if we manage to close just these transactions. I am not too negative in regard to my own situation as the pipeline is quite well filled with some nice clients and promising projects. However, we still need to see if they continue until conclusion. I expect some clients to change their priorities and turn away from M&A for the time being. What are your experiences with clients and projects and what do you expect during the rest of the year?

kees boodt | Friday 20 March 2020 | website: www.boodt.com
Hi Govert,
You do not have to be a clairvoyant to predict that the Corona pandemic will have a major impact on all companies with a large share of imports and exports. If these companies are or are at the stage of an acquisition, the crisis will at least lead to postponement. Companies that find themselves in a bankruptcy situation as a result of the crisis are entering the M&A market. For the M&A market, this means a shift to different types of deals. Deals for which the broker must be well-versed in the relevant industry.
The M&A industry faces very different challenges.
Have a nice time.