João Nunes, Assistant Manager Moneris, writes in the special “mergers and acquisitions” of the Economic Journal. In this forum several experts in the area respond to the panorama of unconfinement and the trends and optimism that is bringing to the market.
On the radar are, for example, companies that benefit either directly from the Recovery and Resilience Plan, as suppliers and service providers to the State.
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The international market of mergers and acquisitions, has shown a significant performance in recent years, also catapulted by a positive behavior of the stock markets, being no exception the Portuguese market, which has seen some transactions of relevant dimension, on a national scale, and in different sectors of activity.
In 2020, however, as the current crisis began, there was a significant drop in the number of transactions. However, in the second half of the year the market reacted and, unpredictably, showed clear signs of recovery, in the context and in the current context.
With regard to 2021, in the m&A market, it is seen that entrepreneurs, managers and companies will tend to be more resilient, so that they are better able to withstand future crises and uncertainties. Thus, it is likely that we will see a growth in the number of transactions, focused on the diversification of business and/ or sectors of activity and with the purpose of obtaining greater and better robustness at different levels. However, recovery is not easy and uncertainties about the future remain.
The challenges are enormous, and many of them are neither “controllable” or measurable when making decisions regarding transactions or opportunities that the market will generate.
With the recent takeover of the new government administration in the US, there is still no change in the isolationist position of that economic power, since the macroeconomic and geopolitical environment remains very focused on tensions with China, which makes it more expansionary policies and conducive to international markets, with the alignment of emerging economies with the Asian country and Europe still “undecided”. This does not provide the agile development of an “active” transactional market, limiting it not only with regard to high-level transactions, but also to all other transactions.
Across all economies and geographies, the enormous challenge of mitigating the current pandemic as well as its health, economic and social consequences remains, and that, despite all the efforts made by different countries in terms of government support for businesses and families, it is unpredictable to still reliably estimate the real short- and medium-term consequences with regard to , in particular, the solvency of the business fabric, with specific implications in some sectors of activity.
Many companies in these most affected sectors have already operated accelerated restructuring, disinvestment or discontinuation of operations processes and have reached an inflection stage. On the other hand, there has been leverage in the rates of use of digital media with regard to commercial transactions and remote work, which could translate into transactional opportunities that could boost the activity of mergers and acquisitions in sectors such as IT or the so-called “green economy”.
With the increased use of digital technologies during the pandemic, the criteria for trading and transaction can significantly change, with the geography factor gradually losing the relevance it has had so far. The consequence of this approach to the m&A market in 2021 and beyond may be relevant.
It should also be noted that the consequences of Brexit on global m&A activity are not yet evident, despite the agreement reached between the UK and the European Union last December, which ensures the continuity of tariff-free trade, so it is not free of volatility at the time of the decision to invest or trade.
However, such volatilities should be seen as a challenge and an opportunity in the development of mergers and acquisitions processes. Finally, to mention that the parties involved in transactional processes should not, at the outset, admit that the “storm” has already passed, so prudence, criterion and reflection is required, so that decision-making is assertive and not hasty. By the way, as it always should be!