The rise of alternative and virtual dealmaking signals a new era of how deals get done
Despite ongoing economic uncertainty amidst a global pandemic, many dealmakers remain optimistic about the outlook for the year ahead as they increasingly pursue alternative merger and acquisition (M&A) methods to navigate the crisis and pursue new disruptive business growth strategies. According to Deloitte is new “Future of M&A Trends Survey” of 1,000 U.S. corporate M&A executives and private equity firm professionals, more than 6 in 10 survey respondents (61%) expect U.S. M&A activity to return to pre-COVID-19 levels within the next 12 months.
Soon after the World Health Organization declared COVID-19 a pandemic on March 11, deal activity in the U.S. plunged — most notably during April and May. Responding M&A executives say they tentatively paused (92%) or abandoned (78%) at least one transaction as a result of the pandemic outbreak. However, since March 2020, possibly aiming to take advantage of pandemic-driven business disruptions, 60% say their organizations have been more focused on pursuing new deals.
“M&A executives have moved quickly to adapt and uncover value in new and innovative ways as systemic change driven by the pandemic has resulted in alternative approaches to transactions,” said Russell Thomson, partner, Deloitte & Touche LLP, and Deloitte’s U.S. merger and acquisition services practice leader. “We expect both traditional and alternative M&A to be an important lever for dealmakers as businesses recover and thrive in a post-COVID economy.”
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Alternative dealmaking on the rise
For many, alternative deals are quickly outpacing traditional M&A activity as the search for value intensifies in a low-growth environment. When asked which type of deals their organizations are most interested in pursuing, responding corporate M&A executives’ top choice was alternatives to traditional M&A, including alliances, joint ventures, and Special Purpose Acquisition Companies (45%) — ranking higher than acquisitions (35%). Private equity investors plan to remain more focused on traditional acquisitions (53%), while simultaneously pushing pursuit of M&A alternatives — including private investment in public equity deals, minority stakes, club deals and alliances (32%).
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