The Case for M&A in a Downturn – Harvard Business Review

Written by Brian Salsberg

Most companies are still in the early days of assessing the impact from the Covid-19 crisis on their business. But as they begin planning for the future, there may be opportunities to make one or more long-sought acquisitions.

Businesses are, or should be, examining their existing lists of potential acquisition targets and should be prepared to act, as deal premiums are likely to come down and assets that companies had been reluctant to sell may become available.

But the window for maximizing value could be relatively short, if history is any indication.

Learning From the Global Financial Crisis

Evidence from the global financial crisis (GFC) from late 2007 through early 2009 shows that companies that made significant acquisitions during an economic downturn outperform those that did not.

There are some caveats: The GFC was, as its name indicates, a financial crisis, and was somewhat limited to the financial services and real estate sectors. Governments needed to bail out banks as many companies were overextended. Consumers were crunched as the value of their homes dropped dramatically and some found their mortgages underwater.

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By Jessica Yap-Chung
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