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

Updated 8/11/2020

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 40% (866 transactions) in July compared to the same period in 2019 (1,434 transactions).
  • Consumer Discretionary sector, one of the earliest and most impacted industries, began to increase weekly deal volume beginning in mid-June. However, the positive trend was short-lived with monthly transactions volume in July 2020 (97 transactions) significantly lower than July 2019 (142 transactions).
  • Banking, Finance & Insurance continues to show strong transaction volume with monthly volume in June and July 2020 (53 and 61 transactions, respectively) surpassing the same months in 2019 (44 and 57 transactions, respectively).
  • The Healthcare industry had a particularly weak July in terms of transaction volume (79 transactions) which was significantly lower than the same month in 2019 (149 transactions).

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 – July 31 is down over 14% (12 transactions) compared to the same period in 2019 (14 transactions).
  • Eight out of the 12 deals that closed between March 22 – July 31 were driven by strategic buyers. In comparison, 2019 saw nearly 40% of transactions (six transactions), completed by strategic buyers in the same period.

Banking, Finance & Insurance

  • Banking, Finance & Insurance appears to have overcome the impact of the pandemic as it shows greater monthly deal volume in July (61 transactions) compared to the same month in 2019 (57 transactions).
  • Strategic buyers drove nearly 96%[1] of all transactions (188 transactions) between March 22 – July 31. In comparison, 2019 saw nearly 98% of transactions (235 transactions) completed by strategic buyers in the same period.
  • Nearly 70% of the acquisitions made between March 22 – July 31 (145 transactions) were in the insurance subsector.
  • Despite the recent strong activity within the Banking, Finance & Insurance industry, M&A volume is down more than 17% (200 transactions) during the time frame of March 22 – July 31 compared to the same period in 2019 (242 transactions).

Building Productions & Construction

  • M&A activity between March 22 – July 31 is down nearly 51% (94 transactions) compared to the same period in 2019 (191 transactions).
  • While monthly transaction volume continues to increase into July 2020 (28 transactions), the monthly volume is still lower than the same period in 2019 (41 transactions)
  • Between March 22 – July 31, Construction and Engineering (46 transactions) made up nearly 77% of the total closed transactions, which closely resembles the nearly 75% of transactions in same period in 2019 (143 transactions).
  • Exactly 86% of transactions closed between March 22 – July 31 (74 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 90% of transactions (161 transactions) completed by strategic buyers within the same period.

Business Services

  • Business Services monthly M&A activity lagged in the month of July 2020 (45 transactions), down nearly 30% compared to July 2019 (64 transactions).
  • Business Services M&A activity between March 22 – July 31 is down over 37% (136 transactions) compared to the same period in 2019 (217 transactions).
  • Nearly 59% of the deals closed between March 22 – July 31 (80 transactions) were comprised of targets engaged in Research and Consulting Services.
  • Over 88% of all transactions completed between March 22 – July 31 (114 transactions) were driven by strategic buyers. This is similar to 2019 which saw over 91% of transactions (187 transactions) closed by strategic buyers within the same period.

Consumer Discretionary

  • Total M&A activity for the industry between March 22 – July 31 is down 48% (301 transactions) compared to the same period in 2019 (579 transactions).
  • Nearly 87% of transactions between March 22 – July 31 (213 transactions) were driven by strategic buyers. Similarly, 2019 saw over 83% of transactions (579 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 nearly 75% (34 transactions) between March 22 – July 31, compared to that of the same period in 2019 (135 transactions).

Diversified Industrials

  • Total M&A activity for Diversified Industrial industry between March 22 – July 31 is down 51% (127 transactions) compared to the same period in 2019 (260 transactions).
  • Nearly 84% of transactions between March 22 – July 31 (102 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 87% of transactions (222 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 74% (94 transactions) of transaction volume between March 22 – Juy 31. This percentage resembles the same period in 2019 when almost 79% of transactions (205 transactions) were comprised of targets in the same subsectors.

Food & Agriculture

  • Food & Agriculture industry's resilience against COVID-19 has shown a decrease in recent weeks. Food & Agriculture transaction volume in the month of July is down over 21% (30 transactions) compared to the same period in 2019 (38 transactions).
  • Nearly 90% of transactions between March 22 – July 31 (105 transactions) were driven by strategic buyers. In comparison, 2019 saw over 80% of transactions (113 transactions) completed by strategic buyers within the same period.
  • Over 45% of the transactions closed between March 22 – July 31 (57 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 42% (353 transactions) between March 22 – July 31 when compared to the same period in 2019 (609 transactions).
  • Monthly transaction volume decreased from 101 to 79 transaction between June and July 2020. Both months are significantly less than the same months in 2019 which saw 152 and 149 transactions, respectively.
  • Over 89% of closed transactions between March 22 – July 31 (296 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 88% of transactions (535 transactions) completed by strategic buyers within the same period.
  • More than 20% of the transactions 713 transactions) closed between March 22 – July 31 were comprised of targets engaged primarily in health care services. In comparison, 2019 saw nearly 30% of transactions (182 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 – July 31, IT & Telecom transaction volume is down nearly 30% (591 transactions) when compared to the same period in 2019 (840 transactions).
  • Nearly 91% of transactions between March 22 – July 31 (521 transactions) were driven by strategic buyers. This percentage of strategic acquisitions is identica tol that of which took place within the same period in 2019; nearly 91% of transactions (739 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 nearly 39% (229 transactions) of all transaction volume between March 22 – July 31, 2020. Similarly, 2019 saw nearly 42% of transactions (350transactions) comprised of targets in the same subsector, although at a much higher volume.

Power & Energy

  • Total M&A transaction volume for the Power & Energy industry between March 22 – July 31 is down more than 30% (125 transactions) compared to the same period in 2019 (179 transactions).
  • Transaction volume comprised of targets engaged primarily in Utilities, a subsector of the Power & Energy industry, stands alone in first place, accounting for more than 58% of the transactions (73 transactions) closed between March 22 – July 31, 2020. In a distant second place are companies engaged in Oil and Gas Storage and Transportation, making up over 15% of volume in the same time frame (19 transactions).
  • Nearly 84% of transactions between March 22 – July 31 (102 transactions) were driven by strategic buyers. Similarly, 2019 saw nearly 87% of transactions (148w transactions) completed by strategic buyers within the same period.

Transportation & Logistics

  • Total M&A activity for the Transportation & Logistics industry between March 22 – July 31, is down more than 50% (35 transactions) compared to the same period in 2019 (71 transactions).
  • Transaction volume within Trucking subsector made up nearly 49% of transactions (17 transaction) followed closely by Air Freight and Logistics making up over 31% of transactions (11 transactions) between March 22 – July 31, 2020.
  • More than 88% of all transactions closed between March 22 – July 31 (30 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 79% of transactions (52 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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