Merger-and-acquisition activity falls despite fears of pandemic feeding frenzy
Published Date: 7/16/2020
Source: axios.com
In April, several prominent Democrats proposed a moratorium on large mergers and acquisitions. Their argument was that the pandemic would embolden the strong to pounce on the weak, thus reducing competition. Fast forward: The moratorium never materialized. Nor did the M&A feeding frenzy.By the numbers: Announced deal value for U.S.-based companies through July 9 were down 64% from the same period in 2019, according to Refinitiv. Aggregate deal value between Q1 and Q2 2020 fell by more than 40%.The number of announced deals did increase slightly between year-to-date 2019 and 2020, but relatively few of those were large transactions that would rearrange the competitive landscape. There also was a sizable decrease for private equity-backed deals, in terms of both value and number of deals.Between the lines: One reason for acquirer hesitance is that it's taking much longer to get deals over the finish line. Take the example of Visa, which in January agreed to pay $5.3 billion for fintech upstart Plaid.At the time, Visa said the deal would close in three to six months. Now Visa says it hopes to finish by year-end.Plaid CEO Zach Perret told me yesterday that the delay was largely driven by a slowdown in the regulatory process, as the federal bureaucracy adjusts to remote work.Then there's the still-surging public equities market. Yes, buyers have more firepower — but many target prices are just too high for comfort, and there have been fewer-than-expected distressed situations. Robust federal lending programs have also kept a number of bankruptcies and near-bankruptcies at bay.The bottom line: The pandemic continues to rage in America, and the M&A mitigation may ultimately look like a first wave phenomenon. But, at least for now, Monopoly needn't release a special 2020 edition.