The most fundamental of the numerous changes COVID-19 has wrought to M&A is the way deals are conducted on the purely functional level. We are talking here about social distancing, which has transformed deal methodology.
With social distancing a fact of life for the past seven months or so, and likely to remain in place for the foreseeable future, remote working has become the norm and the face-to-face element that has been such a core component of M&A for as long as dealmaking has been around has effectively been prohibited.
However, remote working was growing in popularity before the pandemic, which merely fast-accelerated the trend. It is unlikely to move into reverse once the COVID-19 crisis is over.
With remote working remaining prevalent in a post-COVID world, remote M&A could become more widespread too. Deals being done at a distance is of course nothing new, but COVID-19 has taken it to a different level and, in turn, shown just how much can be accomplished remotely.
Those who adjust more quickly to conducting M&A remotely will have an edge over others when it comes to dealmaking. Those idly waiting for normality to resume will find themselves at a distinct disadvantage in the current crisis and will be well behind the curve post-COVID.
What’s more, the dividends of adjusting could be huge. COVID-19 has led to huge levels of distress among businesses, meaning that, for parties interested in making opportunistic acquisitions, there are rich pickings out there.
In distressed acquisitions, speed is of the essence and this pressure is only intensified in a world of remote working. Acquirers need to be ready to conduct negotiations and due diligence remotely in order to get deals done.
Here, we’ll examine what COVID-19 has changed with regards to the process of M&A and how acquisitive parties or business sellers can adjust to make remote dealmaking work best for them.
What has COVID-19 changed in M&A?
M&A has long had a strong emphasis on the personal and the face-to-face. While of course highly globalised, at its core it is an industry built on physical presence, in-person networking, meeting rooms, conferences, handshakes and social events.
Building trust and solid relationships with other dealmakers through face-to-face meetings and networking has been integral to M&A. In the age of COVID-19, however, this is of course no longer possible. In-person meetings are now far harder, with adequate social distancing difficult to manage in cramped, poorly ventilated meeting rooms. Such intensive meetings have traditionally been central to all the elements of a deal, from negotiation to due diligence and beyond.
Environmental due diligence (such as site inspections) is similarly difficult. While it is perhaps easier to conduct inspections and visits in a socially distanced manner than hold in-person meetings, there are still issues. For one, travelling to a site is riskier during COVID-19, especially for long journeys requiring public transport, rail or air travel.
It is far harder to replicate the experience and value of directly viewing a site, equipment or piece of land in-person.
Another aspect that becomes harder is simply building trust. During dealmaking, trust is absolutely foundational, and is normally built through in-person meetings, networking and socialising. If trust is more difficult to build, this could have a knock-on effect on other areas of M&A that have been impacted by COVID-19.
For example, a lack of trust combined with more sinister overarching trends that have become prevalent during the pandemic, such as fraud and cybercrime, could contribute to dealmakers becoming more hesitant to conduct deals remotely.
Finally, a crucial part of an acquisition being successful, integrating the acquisition post-deal, is also trickier. Previously, this might have been achieved through in-person team bonding and co-working, but these are perhaps impossible in the age of COVID-19.
However, as evidence is increasingly showing, the ability to complete deals, sales and acquisitions doesn’t need to suffer just because people are working remotely. In fact, COVID-19 might simply be pointing the way to the future of M&A, a world in which entirely remote deals are part of the norm.
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