M&A in a Downturn

Oct 5, 2020 | Leadership, Strategy

As companies assess the impact of COVID on their businesses, plans to acquire and/or divest are being examined anew.  Synergies and valuations are changing, with some deals being accelerated and others deferred.  Of course, the fundamentals of assessing a deal have not changed, and in fact take on renewed importance.

Expectations around company valuations can be de-coupled from reality so careful analyses, of both revenue and costs synergies, are even more important than ever. 

When viewed through the lens of portfolio management, finding “alpha” in an acquisition can mean expanded market share, acquiring new talent, future product development and/or other innovations. 

“The best acquisitions are ones that consider revenue synergies, not just expense reductions, as part of the valuation process,” said Tom Pizzuti, Partner, KPMG.  “With so much in-person activity on hold, this might be a good time to consider an acquisition as a means to expand into a target market or as a cross-selling opportunity for complimentary products or services.”

With all parties working from home, information management is important.  Curating, assembling and interpreting the data around a deal is not for the faint of heart in standard times and remote teams can add the potential for misinterpretation and/or delay.  In addition to the company teams, a “clean” set of third-party eyes can help ensure appropriate conclusions.

Mergers and acquisitions continue to proceed apace, with new opportunities on both sides of the deal. Whether this is a time you are considering making an acquisition, or becoming part of another entity, maintaining a focus on the future offers a progressive path forward.