Positive signs ahead
Since March 2020 and the first lockdown most businesses have had to review their operations to get through the pandemic. Many have slimmed down their operations or diversified to meet the demands of the market.
There is no doubt that there was initially a slowdown in corporate deals but recently we are seeing some returning positivity to the market. It seems that some businesses have waited long enough for life to return to normal and transactions are still coming through the system.
As we head into 2021, what factors will drive the corporate deal world? The first and probably most important will be the sector.
Clearly retail and hospitality have been dramatically affected with high profile insolvencies and likely more to come. However, we have seen other sectors being resilient.
For example, with the increased use of technology within businesses as employees continue to work from home and an increase in DIY projects, we have identified the digital and technology and home improvement sectors as remaining buoyant and we believe they will continue to be so.
It is probably also true that some businesses may see the current climate as presenting them with opportunities.
No doubt the structure of deals will continue to develop. As valuations become slightly more uncertain due to the lack of financial information, we will see mechanics for adjustments to payments in the transactional documentation or payments being more heavily based upon future performance of the acquired business.
Although with continuing restrictions, the uncertainty that the pandemic continues to bring, and I haven’t mentioned the B word at all, we need to be flexible in our preparations for the future.