M&A in the post-pandemic era: Predictions for the future

The COVID-19 pandemic has had a significant impact on the global economy, and mergers and acquisitions (M&A) have not been immune to its effects.

The consequent headwinds of rising interest rates and inflation, coupled with the invasion of Ukraine by Russia, provided a difficult environment for deals over the past year. However, against the prevailing odds, Europe continues to put on an impressive dealmaking display. Value trended down in the final months of the year, but volume remained comfortably above pre-pandemic levels as the focus shifted toward smaller and strategic transactions. We have definitely seen the impact of this here at Gerald Edelman, with a constantly expanding pipeline of interesting deals across a variety of sectors and countries.

However, we have also seen long-term impacts from the pandemic which has disrupted deal-making and changed the way companies approach M&A (in our opinion for the better). As we move into a post-pandemic era, it is important to take stock of the trends and predictions for the future of M&A.

Acceleration of digital transformation

The pandemic has accelerated the digital transformation of many industries, and M&A is no exception. Companies are increasingly looking for opportunities to acquire technology and digital capabilities to improve efficiency and remain competitive. The trend towards digitalisation is expected to continue, with more deals focused on technology and digital transformation in the future, and the UK is at the forefront of this, ranking second globally for value and volume of deals in the TMT sector in 2022.

Reshaping of industries

We have seen the pandemic reshape industries in many ways, with some companies struggling to survive and others thriving in the new environment. This theme is likely to continue as companies seek to consolidate their positions and adapt to the new reality, and we expect M&A to play a significant role in this. Industries that have been hit hardest by the pandemic, such as hospitality and travel, may see a wave of consolidation as companies seek to survive.

Rise of ESG and sustainability

Environmental, social, and governance (ESG) issues have become increasingly important to investors and stakeholders, and this is likely to be reflected in future M&A deals. The changing nature of consumer habits, with more attention paid to sustainability and health, combined with regulatory pressures are big motivators of M&A activity in this space. Companies that are seen as leaders in ESG and sustainability are likely to be more attractive to investors, and M&A deals may be driven by a desire to acquire these capabilities.

Increased cross-border deals

The pandemic has highlighted the importance of global supply chains and cross-border collaboration. Additionally, our new ways of working through the digitalisation of communication and significantly increased use of virtual meetings has broken down the barrier to cross-border interactions. As a result, we believe we will continue to see an increase in cross-border M&A deals as companies seek to expand their global reach and diversify their operations.

M&A outlook

We expect 2023 will be an exciting time for M&A as the post-pandemic era continues to bring significant changes to the M&A landscape. The acceleration of digital transformation, reshaping of industries, rise of ESG and sustainability, and increased cross-border deals are all trends that are likely to shape the future of M&A. As companies navigate the new reality, it is important to stay aware of these trends and be prepared for the challenges and opportunities they bring. However, due to recessionary fears remaining at the top of dealmakers’ minds, for the immediate future most eyes will be focused on when the Bank of England will signal an end to interest rate hikes. We believe this will act as a catalyst for greater stability and reduction in uncertainty around the future of the economy, leading to an upswing in M&A in the months that follow.

If you would like to speak to our M&A team about your 2023 plans or ambitions, feel free to email Nick Wallis at nwallis@geraldedelman.com or visit our Deal Advisory page here.