IMAP is pleased to announce the release of the IMAP Dealbook 2020-2021, an annual IMAP publication showcasing IMAP's collective transaction track record across a breadth of sectors and geographies.
Click here to view - IMAP Dealbook 2020-2021
Weathering the Covid Cycles on M&A
We are now in the second year of ‘living with Covid’ and its variants. We have a better understanding and appreciation of the oscillating cycles of lockdown, stimulus, healthcare system resilience, vaccine rollout and economy re-opening stages.
Markets are normalizing, unemployment rates are dropping and, primarily in the U.S. and Europe, we saw signs this summer of the virus being contained. But, as we go to press, new waves of infection and hospitalization have shown us that we might be living with this for much longer than anyone anticipated.
When the Covid crisis first emerged, our debt advisory and restructuring teams provided a ‘virtual periscope’ that helped our wider M&A teams understand what was coming down the track. Like an upfront advance reconnaissance team providing an early warning system, they had visibility of the type of help clients needed to solve liquidity and operational challenges and when capital markets were reopening. And so, after an initial global economic shock, high debt levels, COVID-19 vulnerability looming, and a sharp drop in Q2 global M&A activity, we were all expecting the worst.
However, neither the anticipated large restructuring wave, nor the crisis mentality we saw back in 2008 emerged, postponed by unprecedented government support mechanisms. Instead, a sharp revival in economic activity started towards the end of last year and transaction activity bounced back significantly. Paused deals were reactivated, pent-up demand cleared the backlog and well-positioned buyers and sellers ventured back to the market.
In fact, Q4 2020 stands as IMAP’s strongest quarter ever recorded, with 83 deals closed, worth more than $4 billion. A quarter of IMAP transactions in 2020 involved Private Equity firms, a testament to the staggering availability of investment capital. Strong momentum is continuing to date and IMAP closed 112 deals worth more than $14.7 billion during the first half of 2021 with nearly 40% of deals involving a target company in Western Europe and another 21% in North America.
Significant deal activity was also registered in Scandinavia, as well as in Central and Eastern Europe. IMAP’s two biggest sectors are now Technology and Healthcare and make up almost a third of our deal volume globally, followed by Industrials, Consumer & Retail, and Business Services. This is in line with global trends, and industrial deals are expected to move up as we move through this cycle.
While the recovery is exuberant for many, it remains patchy and faltering for some. Commodity, transport and housing cost inflation are working their way through the economy. Rampant increases in inflation are expected to moderate on a year-on-year comparison basis, but to remain relatively high over the next few quarters.
There are shortages of basic items throughout the system - some of this caused by supply chain back-ups because of the pandemic, but years of underinvestment have caught up with many firms, and this is acting as an additional M&A driver. Meanwhile, our restructuring teams are still warning us to expect a slow surge of restructuring activity over the next 36 months as they continue to help clients through extensive scar tissue.
"One thing that this crisis has reminded us of is that neither viruses, nor economic shocks recognize borders"
In spite of this, IMAP’s dealmakers expect strong revenue in H2 2021 and into H1 2022, with strong appetite from both strategic buyers, as well as financial sponsors driving higher levels of activity in the more COVID-resilient industries such as Technology, Education, Infrastructure and Healthcare. IMAP has many great entrepreneurial and innovative people with international experience, working together in spite of Covid, with an enduring spirit of camaraderie, collaboration and professionalism that over the years has come to symbolize the IMAP spirit.
Although IMAP dealmakers have shown great flexibility and have adopted many of the efficiency benefits of moving cross-border deal processes online, everyone agrees that nothing can replace the trust that is developed in-person through conferences and face-to-face meetings. We are moving aggressively back to that mode as soon as conditions permit us to meet again, at the same time maintaining all of the benefits of virtual networking that we have learned over the past 18 months.
One thing that this crisis has reminded us of is that neither viruses, nor economic shocks recognize borders. But it has also shown the resilience, adaptability and professionalism of IMAP teams around the world, working together for our clients under any conditions and in any circumstances.
This Dealbook is dedicated to those clients, the trust that they have put in us, and celebrates their success.
Jurgis V. Oniunas, IMAP Chairman.