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Silver lining on the merger horizon

NAfter the crash in the first weeks of the Corona crisis, the market for mergers and acquisitions appears to be picking up again somewhat. The shock of the initial phase gives way to cautious confidence, according to specialists in Mergers & Acquisitions (M&A). Many started transactions that have been put on hold are being thawed: “After almost all transactions were put on hold in the first phase of the crisis, we have seen an increase in activity in recent weeks “Judges Patrik Czornik, head of JP Morgan’s M&A business in Germany, at the request of the FAZ “Many sales processes that were stopped at the beginning of the crisis are slowly starting to move again. The initiative often comes from prospective buyers who express bilateral interest. “

Internationally, a few transactions stood out from the corona doldrums. The American financial investor KKR wants to acquire the majority of the cosmetics company Wella. In the United Kingdom, O2 and Virgin Media have agreed on a roughly € 36 billion merger and initiated a reorganization of the island’s telecommunications market. JP Morgan is involved in both transactions: in the Wella deal on the side of KKR, in the telecom merger on the side of the Virgin Media parent company Liberty Global. “These transactions were negotiated almost exclusively, virtually”, reports Czornik.

“However, the number of transactions completed has remained very low since the crisis began”

At the beginning of the Corona crisis, the main obstacle was that the Corona standstill made personal encounters impossible. Interested parties could not physically visit company locations, notaries were not or hardly available. In addition to such profane organizational hurdles, there was total economic uncertainty: in March, the stock markets fell sharply under the impression of the corona-related standstill. To the astonishment of many, they have since recovered and have not stabilized very far below the pre-crisis level. The leading German index, Dax, is back above the 12,000 mark after a low in March at a good 8,400 points.

“In Germany, too, we are seeing a resurgence of the M&A dialogue, not least driven by the stabilization of the financing markets,” says Czornik, referring to the still limited activity in absolute numbers: “However, the number of completed transactions is still very high low since the onset of the crisis. ”Several investment banks are cutting jobs. According to reports from the Anglo-Saxon media, Perella Weinberg is in the process of shrinking its workforce by seven percent.

“Expect an increase in crisis-related M&A as well as consolidation mergers’ in hard-hit industries in the coming months”, the law firm Freshfields Bruckhaus Deringer analyzes. This benefits investment companies that specialize in turnarounds – such as Mutares from Munich. “I think this is a unique opportunity in life that you have as a turnaround investor: what the next six, nine, twelve months will be like,” said Mutares board member Johannes Laumann on Thursday of the F.A.Z. on the effects of corona.

According to Mutares, Mutares is currently dealing intensively with around a dozen target companies: “We are somewhere between ten and twelve targets, which we are looking at much more aggressively.” In these cases, one is “in very lively exchange with the seller”. Laumann shares the view heard by many colleagues and investment bankers: that many frozen transactions are reactivated and business picks up again. “I can only confirm the impression.”

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