M&A negotiations have had to pivot during Covid-19 too, Finance Indaba Online hears

Cryptocurrencies and AI are likely to change the face of mergers and acquisitions post-Covid-19.

Three well-known specialists in the M&A space gave Finance Indaba Online attendees valuable insight into the M&A landscape in a time of unprecedented uncertainty, during the ‘Doing deals in tough times: M&A lessons from superstars’ Impact Session.

Both Ansarada’s head of MEA Arie Maree and Edward Nathan Sonnenberg director Lydia Shadrach-Razzino agree that M&A fell off a cliff globally in March 2020 when “nothing happened for two or three weeks”.

“With the start of the pandemic and lockdowns, we went through a phase where every CFO on the planet starting sketching scenarios, there was a flurry of capital raised and rights issues – a lot of debt management activity was taking place,” Arie recalled.

“Towards the end of hard lockdowns, the world got to grips with remote working and M&A. The market is now active and moving into an increase. We are seeing confidence return, with foreign capital returning and vaccination programmes in place, although the pricing can sometimes be contentious,” he added.

With remote working, however, negotiations have taken on a new hue.

“After the initial shock of Covid-19, dealmaking started again with remote working. It is not on the same level and it is a different type of dealmaking, like restructurings, business rescues, non-core assets and consolidations,” Lydia explained.

There are aspects of in-person negotiations that are not possible in a virtual setting, like looking someone in the eye when sitting across from them and being sensitive to body language or non-verbal cues, she noted.

“Online, people switch off their cameras and basically have no reaction, so it became a lot harder to do deals from that perspective. Also, in a sensitive negotiation, a level of trust gets built between parties, which determines the level of risk a party is willing to take. Trust is difficult to build virtually,” she added.

Transaction Capital CFO Sean Doherty fully supported this view and also highlighted that the biggest risk for a company can often be not doing anything.

“The due diligence for the Webuycars deal was done a good four months into lockdown. We had a hybrid approach to the transaction, where all commercials were done face-to-face and things like the shareholders’ agreement was done virtually,” he explained.

That deal took about seven weeks from start to finish. “The other side of risk is opportunity and with a clean balance sheet there are opportunities to be taken advantage of,” Sean said.

All three panellists agreed that the future of dealmaking would certainly include a hybrid, in-person and virtual approach and that this would make the world a smaller place, so to speak.

“The big theme globally is the digital marketplace, using AI and machine learning to put the market place together. Silicon Valley buzzwords like crypto currencies and blockchain are putting buyers and sellers together, creating a smaller virtual world,” Arie concluded.