Survey: Coronavirus crisis leaves M&A ambitions unaffected
sustainability and purpose are becoming increasingly important
For the vast majority of businesses the COVID-19 pandemic and the associated strains on the global economy have no lasting impact on their strategy with regard to mergers and acquisitions (M&A). However, the pandemic is acting as a catalyst for a modern corporate strategy that goes beyond pure profit maximisation. Sustainability and purpose are core issues for companies during and after the crisis. This is the result of a survey conducted by Noerr among the general counsel of leading companies.
Since March 2020, the Covid-19 pandemic has fundamentally affected all aspects of economic and social life worldwide. Governments have closed borders, universities, schools, shops and restaurants and imposed distancing rules. This led to a new normal for businesses and for every individual. The measures taken to protect public health were a drag on the global economy. Governments around the world were forced to take stimulus measures. Without warning, companies found themselves stress-tested in terms of their customer and supplier relationships. For some, fundamental questions arose about their business model.
“Although we saw a short-term shock to the transaction market in the second quarter of 2020, our interviews confirm that 85% of companies do not expect any medium- or long-term impact on strategic M&A ambitions. This finding is in line with the increased M&A activity we have seen in our practice since the third quarter of 2020 at the latest,” said Natalie Daghles, a Noerr partner for Corporate/M&A in Dusseldorf.
Harald Selzner, who is also a Noerr partner for Corporate/M&A in Dusseldorf, added: “However, about half of the companies see challenges in company valuation triggered by the pandemic. Another driver in M&A as well is the increasing focus on ESG (Environmental, Social & Governance) in the corporate strategy, which also has an impact on managing the investment portfolio. The responses reveal surprising insights into the state of businesses’ internal thoughts and debates. With the outbreak of the Covid-19 pandemic, business and social life changed fundamentally and unexpectedly. For many companies, long-standing relationships with customers and suppliers were questioned or stress-tested.
General counsel from 30 leading companies in Germany and Europe from various industries participated in the survey. The survey also revealed the following:
1. Investors & stakeholders (e.g., shareholders, creditors)
- 72% of the general counsel questioned do not see shareholder activism as a threat to their organisation.
- Covid-19 has increased investor engagement due to virtual meetings,
- Covid-19 has led to higher frequency in communication with shareholders,
- contact has become more formal due to a lack of face-to-face interactions.
2. Mergers & acquisitions(M&A)
- 85% of those surveyed see no or only short-term impacts on M&A ambitions.
- 85% state they have not adjusted their M&A strategy due to the Covid-19 crisis.
- 45% see challenges in the valuation of firms triggered by the pandemic.
3. Corporate governance
- 92% say that climate change/environment is of high importance for their organisation.
- 85% say that “purpose” is of high importance for their organisation.
- 81% say that diversity is of high importance for their organisation.
4. Mobile work & travel
- 81% of the general counsel surveyed say that 90% of their workforce will never return full-time to their workplace.
- 85% expect that business travel will never return to pre-pandemic level.
5. Top legal concerns for general counsel
a) Top 5
- Regulatory issues
- Data privacy & cybersecurity
- Environmental, Social & Governance (ESG)
b) How general counsel see their function
- 54% of the general counsel see themselves primarily in a facilitator function to support the business teams to find ways to implement their vision.
- 25% see themselves primarily in a gatekeeper function focusing on safeguarding compliance with legal restraints while business teams implement their vision.
c) Most important strategic initiatives
- 37%: digitalisation and technology
- 11%: risks and compliance
- 11%: reducing spend and increasing efficiencies
- 7%: business integration
d) Importance of legal tech for general counsel
- 58%: very important
- 38%: not important