Time to roll up our sleeves again…
Dear Readers,
The coronavirus has spread to over 200 countries and caused more than 450,000 deaths. There are currently about 8 million confirmed cases worldwide. These shocking figures are probably actually much higher as the estimated number of unknown cases is likely high.
The coronavirus pandemic has brought a deep recession in its wake. In the United States, more than 40 million registered for unemployment within a few weeks. In Germany, the unemployment rate is considerably lower, but these figures are “helped” by the number of partially employed.
The pandemic has also pulled the brake on corporate transactions - at least for the time being. In the medium term, a market of opportunities should emerge. However, it is assumed that 80% of the company acquisitions planned in the first half of 2020 will be cancelled. Despite considerable pressure to consolidate in many sectors, such as tourism, gastronomy, hospitality, automotive, non-food trade, food services, aviation, etc., potential investors are hesitant to make acquisitions. From the investors' point of view, there is simply too much uncertainty with regards to the future. In addition to organizational hurdles during the due diligence phase, pricing is proving extremely difficult. "The figures from 2019 are yesterday's figures, current ones have little meaning, and nobody knows today what it will look like in 2021," said one of our clients in May, who himself has pulled the handbrake on a transaction.
But in June there is already a break in the clouds. Interest in acquisition opportunities above all is increasing significantly. Nevertheless, insolvencies may well increase dramatically from autumn/winter 2020 on. As it can be assumed that the government will institute countermeasures in good time, insolvencies should be kept to a minimum. All in all, the M&A market is on the road to recovery even if it is not be possible to achieve the high, in some cases excessive, purchase prices of the previous year in the foreseeable future.
Provided we succeed in avoiding a second wave of the coronavirus, there is reason to be optimistic about the future of corporate transactions. We are therefore publishing the JP Director's Report again following a break of several months. The opportunities outlined below illustrate the first rays of light in the M&A sky for June 2020.
We wish you every success and good health.
Season’s Greetings,
Heinz Jäger
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