Second Quarter 2020 Mergers & Acquisitions Update

Download our Second Quarter 2020 Mergers & Acquisitions Update

As economic shutdowns persisted into the second quarter, it is unsurprising that mergers and acquisitions (M&A) activity further stalled in the quarter. Deal volume in the US declined approximately 42% while spending on M&A deals fell 25% from the first quarter. The quarter demonstrated that there was extraordinary uncertainty in the market. Midwest M&A activity trended similarly to US activity, with the number of deals completed falling slightly more than 50% from the first quarter.

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Despite the retreat in activity, valuations increased during the quarter, as investors were willing to spend more for the highest-quality companies. The rise in valuations moderately paralleled those of public markets, which in itself may seem counterintuitive given the ongoing economic conditions (see our Second Quarter 2020 Economic & Public Markets Update). Companies that have found solutions to social distancing initiatives and certain healthcare companies have received higher valuations and were in more demand in recent months. As we’ve analyzed in previous updates, the impact of the pandemic has unevenly impacted industries, investments, and M&A activity.

On a positive note, investors as a whole are flush with cash that is ready to be invested – in particular, early stage companies may be prime targets, as venture capitalists are on pace to raise a record amount of funds this year. In general, the third quarter theoretically should fare better than the second quarter, as economies have begun to reopen.

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