Many firms are also in the process of having to reassess the terms of deals in light of the current turmoil.
A third wave of M&A activity may come in the form of new equity raisings as listed companies look to bloster their balance sheets. We've seen this offshore, but it's not yet taken off here.
Eldad Friedman, joint head of investment banking at Investec
He added that the crisis had introduced a new dynamic into the due diligence process. With so much uncertainty, scenario planning to take into account the array of possible earnings outcome was needed, which could be challenging for all parties.
This also affected the way deals were likely to be put together, to account for the different scenarios. “So more complex structures may be required,” said Friedman.
“For example, you are likely to see companies looking to sell off non-core assets in this kind of environment, many of them high quality assets,” he commented.
Further opportunities could come in the form of equity injections, where investors use the current environment to take significant positions in firms at what are likely to be attractive prices.
“We will see who is brave enough to invest their capital in times like these,” he concluded.
You can watch the full video, here.
Eldad Friedman speaks at the following points:
- 2:57 – Impact on the market of the coronavirus
- 10.04 – The challenge of performing due diligences in the current environment and how this impacts the structure of deals
- 17.02 – What are the hurdle rates when doing acquisitions in this market?
- 23.07 – Where the opportunities are likely to be seen
About the author
Patrick writes and edits content for Investec Wealth & Investment, and Corporate and Institutional Banking, including editing the Daily View, Monthly View and One Magazine - an online publication for Investec's Wealth clients. Patrick was a financial journalist for many years for publications such as Financial Mail, Finweek and Business Report. He holds a BA and a PDM (Bus.Admin.) both from Wits University.
Get Focus insights straight to your inbox