As the pandemic altered the business landscape in most industries, it also sped up many M&A trends already in place. Bain’s Andrei Vorobyov, Colleen von Eckartsberg, and Shikha Dassié discuss key M&A themes from the past year, including the rise in deals aimed at improving capabilities, an increase in governmental oversight, a decline in cross-regional deals, and the rapid increase in digital tools that support M&A.
Read a transcript of the video below:
ANDREI VOROBYOV: This is our third Bain Global M&A Report. What we tried to do this year is introduce a new format. We're actually looking at M&A by industry. We use our global knowledge, but we also administered a survey of about 300 M&A professionals, where we talked to them and we asked them questions: What's happening in the world of M&A? We saw multiple M&A trends continue into 2020. One of them is the rise of the scope deals. Companies continue to acquire new capabilities that they need to survive in the new world or to thrive in the new world.
SHIKHA DASSIÉ: Capability-driven M&A has grown seven times in the last five years. Companies are realizing the need to bring in new-world capabilities in-house, and that's driving a lot of this growth. In the years prior, we've seen a lot of capability deals in robotics, in data analytics, proprietary data, in gene therapy, and various other areas. Covid specifically accelerated this trend in areas like home delivery, teleconferencing, telemedicine—all the sectors that got a big boost due to the consumer needs that arose during the crisis.
COLLEEN VON ECKARTSBERG: One of the striking things for us at Bain was that right at the outset of the crisis, within the first few weeks, the most forward-thinking CEOs overwhelmingly declared that they needed a major strategic refresh and that the M&A roadmap was going to be a critical component of that, that it needed to move faster and have a broader set of more agile and broader thinking behind it.
VOROBYOV: Another trend was government oversight of M&A. Government oversight was not only about the current competition but also about the future competition, also about national security. Those concerns, especially with the pandemic, were heightened during 2020.
DASSIÉ: Cross-regional dealmaking was already declining before the crisis hit. We believe cross-border dealmaking will continue to decline, especially out of Asia-Pacific because of the focus that Covid has brought on localizing of supply chains and because of continued regulator scrutiny of cross-border deals.
VOROBYOV: Digitization of M&A is not something new. That's something we've talked about for a while. However, nobody expected the M&A industry to transform to pretty much virtual deal processing within months. Going forward, we don't expect the M&A industry to come back to the old ways of working. We expect a higher mix of virtual collaboration. We expect a higher mix of digital tools going forward. However, we also don't expect the in-person aspect to go away.
VON ECKARTSBERG: So I think it's really important to walk into this with a sense of agility and flexibility and continuing to do that refresh at different moments as we slowly move out of this Covid era into the new normal because there will be more changes in store, and we are not 100% certain which ones those will be.