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

    5 min read time

    Updated 10/20/2020

    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 M&A

    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

    • M&A activity continues to feel the effects of COVID-19. Total U.S. M&A volume is down nearly 30% (908 transactions) in September compared to the same period in 2019 (1,295 transactions).
    • For the first time since March, the Food and Agriculture industry has surpassed monthly transaction volume compared to the same period the year before. In September 2020, 34 transactions closed as compared 32 transactions in September 2019.
    • Transportation & Logistics industry had a stronger August and September (14 and 15 transactions, respectively) compared to the same months in 2019 (12 and 11 transactions, respectively), marking the first industry to see 2 consecutive months of greater monthly transaction volume compared to 2019 since the pandemic began.

    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

    • Aerospace, Defense & Government Contracting continue to see little M&A activity during the COVID-19 pandemic.
    • Total transaction volume for the industry between March 22 – September 30 is down nearly 23% (17 transactions) compared to the same period in 2019 (22 transactions).
    • Thirteen out of the 17 deals that closed between March 22 – September 30 were driven by strategic buyers. In comparison, 2019 saw over 45% of transactions (ten transactions), completed by strategic buyers in the same period.

    Banking, Finance & Insurance

    • Banking, Finance & Insurance industry has been resilient to the pandemic impacts, however, saw a 13% decrease in monthly transaction volume in September (39 transactions) compared to the same month in 2019 (45 transactions)
    • Strategic buyers drove nearly 97%[1] of all transactions (283 transactions) between March 22 – September 30. Nearly identical to 2019 which saw just over 97% of transactions (322 transactions) completed by strategic buyers in the same period.
    • Nearly 73% of the acquisitions made between March 22 – September 30 (218 transactions) were in the insurance subsector.
    • Despite the recent strong activity within the Banking, Finance & Insurance industry, M&A volume is down nearly 12% (299 transactions) during the time frame of March 22 – September 30 compared to the same period in 2019 (338 transactions).

    Building Productions & Construction

    • M&A activity between March 22 – September 30 is down nearly 40% (165 transactions) compared to the same period in 2019 (274 transactions).
    • While monthly transaction volume has been stable in Q3 2020 (average 32 transactions per month) the monthly volume is still lower than the same period in 2019 (average 41 transactions per month)
    • Between March 22 – September 30, Construction and Engineering (131 transactions) made up over 79% of the total closed transactions, which is greater than the 75% of transactions in same period in 2019 (206 transactions).
    • Nearly 88% of transactions closed between March 22 – September 30 (135 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 90% of transactions (230 transactions) completed by strategic buyers within the same period.

    Business Services

    • Business Services monthly M&A activity continues to lag as September 2020 (31 transactions), is down nearly 30% compared to September 2019 (49 transactions).
    • Business Services M&A activity between March 22 – September 30 is down over 31% (213 transactions) compared to the same period in 2019 (310 transactions).
    • Over 58% of the deals closed between March 22 – September 30 (124 transactions) were comprised of targets engaged in Research and Consulting Services.
    • Nearly 91% of all transactions completed between March 22 – September 30 (185 transactions) were driven by strategic buyers. This is comparable to 2019 which saw over 90% of transactions (266 transactions) closed by strategic buyers within the same period.

    Consumer Discretionary

    • Total M&A activity for the industry between March 22 – September 30 is down 45% (466 transactions) compared to the same period in 2019 (847 transactions).
    • Over 85% of transactions between March 22 – September 30 (331 transactions) were driven by strategic buyers. Similarly, 2019 saw over 81% of transactions (577 transactions) completed by strategic buyers within the same period.
    • Transaction volume within Hotels, Resorts and Cruise Lines, a subsector of the Consumer Discretionary industry, has realized overwhelming blows during COVID-19. Total subsector transaction volume is down over 72% (57 transactions) between March 22 – September 30, compared to that of the same period in 2019 (204 transactions).

    Diversified Industrials

    • Total M&A activity for Diversified Industrial industry between March 22 – September 30 is down over 41% (221 transactions) compared to the same period in 2019 (376 transactions).
    • Over 84% of transactions between March 22 – September 30 (182 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 86% of transactions (311 transactions) completed by strategic buyers within the same period.
    • Transaction volume comprised of targets primarily engaged in Trading and Distribution and Industrial Machinery, subsectors of the Diversified Industrials industry, accounting for over 79% (175 transactions) of transaction volume between March 22 – September 30. This percentage resembles the same period in 2019 when almost 80% of transactions (299 transactions) were comprised of targets in the same subsectors.

    Food & Agriculture

    • Food & Agriculture transaction volume in the month of September 2020 (34 transactions) surpassed that of the same period in 2019 (32 transactions).
    • Nearly 88% of transactions between March 22 – September 30 (160 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 82% of transactions (163 transactions) completed by strategic buyers within the same period.
    • Over 45% of the transactions closed between March 22 – September 30 (87 transactions) were comprised of targets engaged primarily in the subsector of Packaged Foods and Meats.

    Healthcare

    • Despite the Healthcare industry's essential industry status, total transaction volume is down nearly 33% (583 transactions) between March 22 – September 30 when compared to the same period in 2019 (868 transactions).
    • Nearly 89% of closed transactions between March 22 – September 30 (499 transactions) were driven by strategic buyers. Similarly, 2019 saw 87% of transactions (755 transactions) completed by strategic buyers within the same period.
    • Nearly 25% of the transactions (143 transactions) closed between March 22 – September 30 were comprised of targets engaged primarily in health care services. In comparison, 2019 saw over 29% of transactions (253 transactions) comprised of targets in the same subsector within the same time frame.

    IT & Telecom

    • The IT & Telecom industry continues to experience lower transaction volume compared to 2019. Between March 22 – September 30, IT & Telecom transaction volume is down over 26% (706 transactions) when compared to the same period in 2019 (1,227 transactions).
    • Over 90% of transactions between March 22 – September 30 (797 transactions) were driven by strategic buyers. This percentage of strategic acquisitions is identical to what took place within the same period in 2019; over 90% of transactions (1,075 transactions) were completed by strategic buyers, although at a much higher volume.
    • Transaction volume comprised of targets primarily engaged in Application Software subsector of the IT & Telecom industry, accounted for over 40% (365 transactions) of all transaction volume between March 22 – September 30, 2020. Compared to 2019 which saw over 67% of transactions (493 transactions) comprised of targets in the same subsector.

    Power & Energy

    • Total M&A transaction volume for the Power & Energy industry between March 22 – September 30 is down nearly 31% (181 transactions) compared to the same period in 2019 (262 transactions).
    • Transactions comprised of targets engaged primarily in Utilities, a subsector of the Power & Energy industry, account for nearly 58% of the transactions (104 transactions) closed between March 22 – September 30, 2020. In a distant second place are companies engaged in Oil and Gas Storage and Transportation, making up nearly 18% of volume in the same time frame (32 transactions).
    • 85% of transactions between March 22 – September 30 (147 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 84% of transactions (208 transactions) completed by strategic buyers within the same period.

    Transportation & Logistics

    • Transportation & Logistics industry has had four consecutive months of increasing monthly transaction volume beginning in June 2020.
    • August and September are particularly notable (14 and 15 transactions, respectively) for surpassing the volume of the same months in 2019 (12 and 11 transactions, respectively).
    • Despite being the first industry to see 2 consecutive months of greater monthly transaction volume compared to 2019 since the pandemic began, industry M&A volume is still down nearly 30% (66 transactions) between March 22 – September 30, compared to the same period in 2019 (94 transactions). The difference is primarily driven by the immediate impact of the pandemic in April when monthly transaction volume was down nearly 71% (7 transaction) compared to April 2019 (24 transactions).
    • Transaction volume within Trucking subsector made up nearly 48% of transactions (31 transaction) followed closely by Air Freight and Logistics making up over 32% of transactions (21 transactions) between March 22 – September 30, 2020.
    • More than 95% of all transactions closed between March 22 – September 30 (57 transactions) were driven by strategic buyers. In comparison, 2019 saw over 78% of transactions (68 transactions) 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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