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M&A activity during COVID-19 and beyond

How to address the uncertainties related to buy-side M&A?

How to address the uncertainties related to buy-side M&A?

Deal activity during COVID-19 in Finland

Over the past year, M&A activity in Finland has remained high despite the financial uncertainties caused by the coronavirus. Activity fell momentarily when the pandemic began in the spring of 2020, but rose rapidly to previous levels in the autumn. In Q1 2021, deal activity exceeded the volumes recorded for the corresponding periods of 2017, 2019 and 2020.

number of acquisitions in finland

Source: Mergermarket. Acquisition target in Finland and value over € 5 million. Qtr2 year-to-date (10.5.2021)

In terms of sectors, the technology sector in particular has remained buoyant throughout COVID and has even increased its share of deal volumes from approximately 20% in 2017-2019 to around 30% in 2020-2021 (COVID period). One very significant technology sector deal was the sale of Innofactor’s Prime business segment to Total Specific Solutions B.V. in the Netherlands, showing that foreign buyers have also remained active in the Finnish market. Almost all of KPMG’s deal advisory services were represented in the project, including KPMG Corporate Finance, the Global Strategy Group and Technology Advisory.

MA activity

Source: Mergermarket. Acquisition target in Finland and value over € 5 million. 2021 year-to-date (10.5.2021)

Acquisition target in Finland and value over € 5 million. 2021 year-to-date (10.5.2021)

Source: Mergermarket. Acquisition target in Finland and value over € 5 million. 2021 year-to-date (10.5.2021)

Buy-side execution uncertainties in the new reality

Looking ahead to the post-COVID era, many of our clients expect high M&A activity over the next 1-3 years, as companies re-evaluate their portfolios and reinvest their cash in order to meet growth targets.

However, acquisitions are notoriously difficult to execute in any environment – and the new market order created by COVID will only further complicate this process. According to KPMG's global survey carried out in 2020, companies feel that their biggest current concerns in acquisitions are:

1. Internal uncertainties with respect to making deals 

2. Market uncertainties, especially difficulties in predicting the future

3. Difficulties in finding suitable deal targets

To alleviate these concerns, we have assembled a few important guidelines for companies as they navigate their way through the world of acquisitions during and after COVID.

Considerations during a buy-side process to address execution uncertainties

Internal uncertainties with respect to making deals – Due to the extra uncertainties caused by COVID, it is vital to avoid internal uncertainties by ensuring that acquisitions are in harmony with each company’s current strategies. To ensure that they keep on the right path, companies should:

  • clearly articulate their strategic goals with respect to acquisitions
  • develop synergy calculations for acquisitions
  • identify critical areas – those with the potential to cause problems when an acquisition is integrated into the company

Market uncertainties, especially difficulties in predicting the future – To address market uncertainties and the difficulties inherent in predicting the future, companies should:

  • validate the current market size and growth forecasts for each target company
  •  assess the competitive position both with and without the target company
  • evaluate changed customer behaviour and customer opinions due to COVID

Difficulties in finding suitable deal targets – While eying possible acquisition targets, a target identification and prioritization study, using publicly available information, should be conducted in order to:

  • identify all potential targets on the market and develop a long list based on these identifications
  • assess the targets in terms of certain evaluation criteria, e.g. financial attractiveness, feasibility, and strategic fit
  • prioritize those targets that best meet the goals of the company

How can we help?

The economic disruption caused by the COVID-19 lockdown has arguably changed the dynamics of the M&A market. As the market begins to recover and normalize, businesses will need to:

1) do their homework in order to assess each target’s strategic fit with the company (thus addressing internal uncertainties with respect to making deals), 

2) look at how well the target is positioned for recovery (thus addressing market uncertainties and difficulties in predicting the future), 

3) identify all potential targets on the market, develop a long list based on these identifications and prioritize selected targets (thus finding suitable deal targets)

The KPMG Global Strategy Group and Corporate Finance in Finland serve clients in all phases of M&A and for transactions in all sectors. We have developed a suite of tools that allow our M&A teams to uncover critical sources of value (and risks to value) at deal speed.

Our typical assignments are:

  • Target identification and evaluation
  • M&A due diligence and synergy cases
  • JV and partnership strategy
  • Refinancing and restructuring
  • Exit strategies, divestments and carve-outs
  • IPO support
  • Integration/separation planning and execution

Feel free to contact us and hear more!