NEW YORK: As the coronavirus roils markets, dealmakers are pulling out all their tricks to get transactions done.
Auctions are accelerating in case conditions worsen. Sellers are choosing cash upfront over higher offers; and they’re doing it all over video chat while pets and children roam in the background.Welcome to M&A during a pandemic.
“I think people are grasping the fact they need to do their jobs when everyone is home, and you have to deal with your family and chores, ” said David Gandler, chief executive officer of FuboTV Inc, which agreed on Monday to merge with FaceBank Group Inc.
Deals are still getting done, despite market turmoil whipsawing stocks, threatening liquidity and muddling valuation predictions. Companies announced US$62.5bil of mergers, acquisitions and investments since the virus was deemed a pandemic on March 11, according to data compiled by Bloomberg.To be sure, that’s less than half the amount during the same period a year earlier, meaning 2020 could be one of the worst years for M&A in a decade if that pace holds. And some transactions coming together now will have been percolating since before the outbreak.
Still, private equity buyers in particular have been snapping up assets despite the volatility. Buyout firm KKR & Co’s £4.2bil deal for Pennon Group Plc’s waste-management arm Viridor Ltd came together much faster than a regular auction, people familiar with the negotiations said. — Bloomberg
In the early stage of the process, KKR leapfrogged the request for non-binding bids and instead came to Pennon with a fully financed proposal on March 13, said the people, who asked not to be identified as the details aren’t public. KKR was betting that the company would prefer the certainty of a firm offer instead of risking additional bidding rounds. It was right: the parties entered negotiations within hours and announced a deal five days later.In the age of social distancing, most of the hurried negotiations took place over video conferences, the people said, with the associated technological glitches and unpredictable interruptions that those interactions entail.
The team advising gold miner Endeavour Mining Corp. on its US$690mil all-share deal for Semafo Inc, announced on Monday, ran into similar issues, according to Jan Sanders, a partner with Endeavour’s advisory firm Gleacher Shacklock LLP.
On-site visits and other physical due diligence took place before the pandemic ruled out in-person meetings, Sanders said. That made it possible for the deal to still come together.
Special care was taken as Endeavour Chairman Michael Beckett is 83 years old and so considered higher risk if he were to catch the virus, CEO Sebastien De Montessus said in an interview.
“What’s going to be challenging, to be frank, will be if we need to start the integration by video conference, ” De Montessus said. “That’s unprecedented.”
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