Corporate and private equity dealmaking has been heavily disrupted since the onset of COVID-19 last year. The pandemic has prompted many firms to pause their more ambitious investment programmes and instead focus on bolstering their existing portfolios or undertaking long overdue restructuring in order to cut costs.
This has led to bolt-on acquisitions becoming one of the most prominent dealmaking trends over the past year, as firms seek to strengthen their existing businesses. Research from Rickitt Mitchell earlier this year found a 35 per cent increase in the number of UK private equity bolt-on transactions in 2020, from 276 in 2019 to 370 last year.
Bolt-on acquisitions involve takeovers of smaller companies in the same line or an adjacent line of business to existing businesses in a portfolio. They represent solid, low-risk strategic investments during uncertain times, as well as offering the benefit of acquisitive growth at a time when organic growth is constrained.
Alongside this, there has been an even bigger increase in corporate carve-out deals during the pandemic, with a report from Mayer Brown claiming that the value of UK corporate carve-out deals had increased from £765 million in 2019 to £10.1 billion in 2020.
There are numerous factors driving the huge increases in these types of deal and the question of whether this will persist will play a massive role in shaping the post-COVID-19 M&A market.
What’s driving the increases?
Will bolt-ons remain popular?
Will the surge in carve-outs persist?
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