The Impact of COVID-19 on U.S. M&A

Updated 5/21/2020

We are exploring the effect of COVID-19 on mergers and acquisitions in the United States. As this historic pandemic continues to evolve, we will track the number of COVID-19 cases and compare them to the overall M&A deal volume and provide market observations. Check back each week for updated information.  

The Impact of COVID-19 on Middle Market MA

For purposes of this analysis, PCE focused on data trends beginning March 22 when new cases of COVID-19 increased significantly.

Total M&A Market

  • Consumer Discretionary plays the role of the canary in the coal mine with a devastating drop in transactions appearing as early as mid-March.
  • The Food & Agriculture industry weathered the storm during COVID-19 with April transaction volume displaying a strong month-end finish, likely due to its essential industry status.
  • Total transaction volume in the U.S. began diverging in mid-March when weekly new cases of COVID-19 started increasing exponentially. The weeks ending April 4 – May 2 showed weaker increases in volume compared to 2019, indicating less month-end deal closings.

Effects of COVID-19 by Industry

Jump to industry details by clicking on any industry listed below:

Aerospace, Defense & Government Contracting

Banking, Finance & Insurance

Building Products & Construction

Business Services

Consumer Discretionary

Diversified Industrials

Food & Agriculture

Healthcare

IT & Telecom

Power & Energy

Transportation & Logistics

Aerospace, Defense & Government Contracting

  • The Aerospace, Defense & Government Contracting industries have run out of fuel during the COVID-19 pandemic with only two closed transactions taking place roughly one month apart between March 22 – May 16.
  • Although the Aerospace, Defense & Government Contracting industry is not known for its high transaction volume, transaction activity between March 22  – May 16 is down nearly 63% compared to the same period in 2019.
  • All deals (3) closed within the time frame of  March 22 – May 16 were by strategic buyers. In comparison, 2019 saw nearly 13% of transactions made by strategic buyers.

Banking, Finance & Insurance

  • Strategic buyers in the Banking, Finance & Insurance industry reign supreme during COVID-19. Strategic buyers drove nearly 94%1 of all transactions (65 transactions) between March 22 – May 16. In comparison, 2019 saw 98% of transactions were completed by strategic buyers within the same period.
  • Nearly 67% of the acquisitions made between March 22 – May 16 (46 transactions) were of insurance companies.
  • M&A activity within the time frame of March 22 – May 16 is down close to 44% compared to the same period in 2019.

Building Productions & Construction

  • M&A activity between March 22 – May 16 is down over 61% compared to the same period in 2019.
  • Between March 22 – May 16, Building Products and Construction Materials (9 transactions) made up nearly 27% of transactions, while Construction, Engineering, and Homebuilding (25 transactions) made up the balance.
  • Over 77% of all transactions closed between March 22 – May 16 (24 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 93% of transactions were driven by strategic buyers within the same period.

Business Services

  • Business Services M&A activity between March 22 – May 16 is down approximately 54% compared to the same period in 2019.
  • 50% of the deals closed between March 22 – May 16 (22 transactions) comprised of targets engaged in research and consulting services.
  • Nearly 81% of all transactions completed between March 22 – May 16 (33 transactions) were driven by strategic buyers. In comparison, 2019 saw over 92% of transactions were closed by strategic buyers within the same period.
  • A spike in deal volume in the week ended May 9 may indicate that the pandemic delayed transactions targeting April month-end.

Consumer Discretionary

  • Consumer Discretionary was truly the canary in the coal mine as the drastic effects of COVID-19 were felt immediately in mid-March.
  • Hotels, resorts, and cruise lines transactions are down nearly 85% between March 22 – May 16 compared to that of the same period in 2019.
  • Total M&A activity for the industry between March 22 – May 16 is down over 66% compared to the same period in 2019.
  • Nearly 93% of transactions between March 22 – May 16 (63 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 81% of transactions were completed by strategic buyers within the same period.

Diversified Industrials

  • Diversified Industrials continues to experience the economic downsides brought on by Covid-19.
  • Industry M&A activity between March 22 – May 16 is nearly 66% of the total volume of the same period in 2019.
  • 80% of transactions between March 22 – May 16 (32 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 88% of transactions were completed by strategic buyers within the same period.

Food & Agriculture

  • Despite a dip in transactions in the week ended May 16, the Food & Agriculture industry has shown resilience against COVID-19.
  • The pandemic’s early impact appears to have delayed the bulk of March month-end closings until the week ending April 11. The industry demonstrated its strength in April, where it surpassed 2019 with month-end closings in the week ending May 2.
  • Over 93% of transactions between March 22 – May 16 (43 transactions) were driven by strategic buyers. In comparison, 2019 saw 79% of transactions were completed by strategic buyers within the same period.

Healthcare

  • The Healthcare industry has found a new resting heart rate with M&A activity with a relatively stable number of transactions through May 16.
  • Despite its essential industry status, total transaction volume is down over 57% between March 22 – May 16 when compared to the same period in 2019.
  • Nearly 30% of the transactions closed between March 22 – May 16 (34 transactions) were comprised of targets in pharmaceuticals, biotechnology, and life sciences.
  • 89% of transactions between March 22 – May 16 (97 transactions) were driven by strategic buyers. In comparison, 2019 saw over 84% of transactions were completed by strategic buyers within the same period.

IT & Telecom

  • M&A activity within the IT & Telecom industry has remained resilient during the COVID-19 pandemic, with deal volume holding steady during this time of unprecedented uncertainty.
  • Over 34% of the transactions closed within the time frame of March 22 – May 16 (84 transactions) were comprised of targets engaged in information technology software.
  • Over 89% of transactions between March 22 – May 16 (213 transactions) were driven by strategic buyers. In comparison, 2019 saw over 91% of transactions were completed by strategic buyers.
  • The demand for this industry has soared as businesses switch to work from home operations, which could continue to spur demand for synergistic needs.

Power & Energy

  • The Power & Energy industry fights to keep the lights on with M&A activity between March 22 – May 16 down nearly 36% compared to the same period in 2019
  • Over 53% of the transactions closed between March 22 – May 16 (24 transactions) comprised of targets engaged primarily in utilities. Oil and gas companies were close behind with 33% of transactions in the same time frame.
  • Over 84% of transactions between March 22 – May 16 (37 transactions) were driven by strategic buyers. In comparison, 2019 saw over 88% of transactions were completed by strategic buyers within the same period.

Transportation & Logistics

  • The COVID-19 impact on Transportation and Logistics was delayed as transaction activity remained stable until the week ending April 4. The most significant divergence is transaction volume began in mid-April, with only one closed transaction between the weeks ending April 25 – May 16, 2020.
  • Although the Transportation & Logistics industry is not known for high transaction volume, the industry’s transaction activity between March 22 – May 16, is down nearly 64% compared to the same period in 2019.
  • Over 92% of all transactions closed between March 22 – May 16 (12 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 86% of transactions were completed by strategic buyers within the same period.

1. Percentage of strategic vs financial buyers throughout commentary based on total transactions with published buyer data available.

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