2020 M&A Annual Review

2020 brought the COVID-19 pandemic and other headline-grabbing challenges, along with the usual quadrennial questions around the U.S. election. Early in the year, businesses and dealmakers focused on the pandemic and revised their strategies as understanding of its impact evolved. The M&A market, like the overall economy, was hit hard, before rebounding later in the year. In this alert, we look at some of the ways M&A changed in 2020, particularly those changes likely to continue into 2021. M&A IN 2020 AND TRENDS FOR 2021 DEAL ACTIVITY REBOUNDS QUICKLY Unsurprisingly, M&A activity reached record lows in early 2020 as the pandemic encircled the globe and companies acted to protect their personnel and businesses and faced an unprecedented reality of closures, social distancing, and other restrictions. But within months, companies began getting back to potential deals that had been put on hold and moving forward on new deals. Dealmakers applied new tools and processes to an almost exclusively remote work environment. Globally, after falling 25% in the second quarter compared to the first quarter, M&A activity rose 90% in the second half of the year, ending the year with only a 3% decline in volume from 2019. 1 In the Unites States, deal value likewise rebounded in the third quarter and even more in the fourth quarter, but didn’t make up entirely for the drop in the second quarter; deal value for the year ended down 21%. Reflecting a potential impact of the pandemic, acquisitions out of bankruptcy rose 59% by value. 2 U.S. SECTOR BREAKDOWN TREND 2015–2020 GRAPHIC PROVIDED BY MERGERMARKET