Coronavirus (COVID-19)—impact on private M&A transactions

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Coronavirus (COVID-19)—impact on private M&A transactions
  • Factors affecting deal activity
  • Due diligence
  • Data rooms
  • Issues to focus on in due diligence
  • Consideration
  • Conditions to completion
  • Regulatory approvals
  • Material adverse change (MAC)
  • Long stop date
  • More...

Coronavirus (COVID-19)—impact on private M&A transactions

Factors affecting deal activity

The Coronavirus (COVID-19) pandemic will have an effect for its duration on many aspects of corporate law for legal practitioners and their clients. The impact on private M&A transactions will probably go beyond the period of the pandemic itself as regards the impact on the economy and individual businesses. Specific consequences that directly result from the pandemic include:

  1. financial viability of conducting an acquisition—given the economic upheaval and shock to the world economy, will buyers have the necessary available funds to carry out a private M&A transaction? A potential buyer may look to maintain or bolster its cash reserves rather than seek out acquisition opportunities as a means of prudent financial management to weather the challenges of the COVID-19 pandemic

  2. heightened transaction risk—there is increased risk for a buyer in concluding a transaction during a time of extreme volatility, which could lead to the buyer overpaying for its acquisition target or acquiring what transpires to be a flawed asset. Distressed sales once the effects of the pandemic have played out may provide better valuations and decreased risk

  3. valuation difficulties—this is linked to the point above and covers the difficulty the buyer will face in carrying out an accurate assessment of the value of the target company or business/assets (target) it looks to acquire (as per comments

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