Chris Evans

18th June 2020


Acquisitions in a post-COVID world

Three different types of acquisition in a post-COVID world

M&A activity across the global economy started at a phenomenal pace in 2020 as companies looked for a good place to park their excess cash in a still low interest environment. However, as with most plans for this year, COVID-19 put many deals on the back burner as companies grappled with this ‘once in a generation’ crisis.

Previously buoyant financial conditions became stuck, prospective buyers battened down the hatches to protect their own balance sheets and the world collectively held its breath and wondered ‘what next?’.

As restrictions are increasingly relaxed, so the picture is shifting. The possibility of a Depression Era contraction in major economies remains a real danger with debt financing still overly cautious. Fears of a second wave may continue to keep M&A activity depressed for the immediate future.

For companies with the spare capacity, resources and appetite for risk, this has never been a better time to acquire. How to spot an acquisition depends on your desired outcome. Having analysed millions of companies and helped thousands of clients find the best targets, Plimsoll has identified three distinct opportunities to acquire, even in today’s climate:

Opportunity to purchase undervalued companies

The COVID-19 crisis has affected companies across all sectors of the economy. Previously strong companies have seen their overall value depressed during the crisis. They have a history of high performance. Whether it is a competitor or a chance to buy within your value chain, some extraordinary companies could be acquired for less than their true value.

Corporates selling or spinning off non-core assets

Never has there been such a rush to shore up the balance sheets of parent companies, both foreign and domestic. Large groups are increasingly looking to address their own liquidity issues to survive the pandemic by selling off non-core assets, often at fire sale rates.

Becoming an angel investor for distressed companies

Companies are increasingly finding value acquisitions by injecting capital into distressed companies in exchange for large equity stakes or even outright ownership. Many parts of the UK economy are awash with companies in need of a recapitalisation or with crippling liquidity constraints. For a cash rich business, now is an unprecedented buyers’ market in all parts of the economy. The number of companies in need of recapitalisation is at a record high. The number of buyers circling is at historic lows. Debt financing is still depressed. Once the economy starts to rebound, appetite and risk will return to M&A activity. The smart money will be active long before that happens.

Plimsoll provides a host of analytical and search platforms to help you narrow down millions of companies in thousands of markets in over 150 countries to help you find the right targets for your business. Whether it is by industry, location, size, value, growth rate or financial health, we can help you find the companies that meet your acquisition criteria – today. Contact us to learn more!