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M&A: Solutions to mitigate uncertainty caused by coronavirus

With public markets collapsing and economists predicting a Eurozone recession, the European M&A market must also be expected to be heavily impacted by the coronavirus.
Stethoscope or phonendoscope on a doctor's white desk on cloudy morning. Treatment of cold or flu.

“There will be transactions pulled if there hasn’t been already,” said a partner at one London-based private equity firm. “There is too much uncertainty and sellers will need to adjust to the new environment. It will take some time for the new reality to be reflected in pricing.”

Companies involved in travel, events, education, restaurants, retail or with deep supply chains in China or Italy have suffered. The fallout has rippled outwards hurting oil and gas. Many economists are now predicting a Eurozone recession that would be felt across all sectors.

In this climate, people are starting to wonder what their options are. Investors are starting to look at material adverse change (MAC) clauses, earn-out mechanisms, deferred consideration payments and other mechanisms to compensate for the uncertainty and mitigate value expectations.

Completing a due diligence process including management meetings may also be challenging, but most of the transaction process can be completed remotely by digital data rooms, electronic document exchange, video conferencing and virtual site tours and this should thus allow most processes to proceed.

This turmoil creates uncertainty, but also opportunities. The M&A team at Simonsen Vogt Wiig is ready to assist you finding solutions to mitigate the uncertainties caused by the coronavirus and to position you for the opportunities that will emerge.