Comparison between the 2020 and 2021 m&a market in Dallas: A detailed overview:

market in Dallas

Introduction:

2020 has gone down in history as one of the worst years for global businesses, and as a result, it affected economies worldwide. The COVID-19 outbreak caused even economies of scale to tremble and topple, and therefore translated to one of the worst-hit years for the market after the ‘Great Depression of the 1930s.

It is no secret that this year saw a massive slump in mergers and acquisitions as well, not just across Dallas or the States but across the entire world. According to a reputed m&a advisor Dallas, the Corporate Deal Tracker from the Texas Lawbook reported a 30% decrease in transactions. This was accompanied by a 20% drop in value compared to what went down in 2019. As a result, there were 429 m&a transactions across the entirety of Texas in 2020 compared to 623 m&a transactions that occurred in 2019.

The broad reasons for the decreased m&a transactions in 2020:

According to the advisors and specialists spread across Dallas, a couple of reasons led to the dismal financial year for mergers and acquisitions.

    The COVID-19 pandemic:

It can definitely be touted as the most apparent reason for the slowdown of mergers and acquisitions. Since several companies and organizations closed down owing to the lockdown and quarantine-induced recession, mergers and acquisitions became a long-drawn prospect. For more prominent companies that looked to acquire the smaller enterprises and ensure their operation, cash flow became a big issue amid the COVID-19 pandemic.

With fewer financial resources, it would be an insurmountable task to acquire smaller enterprises and breathe life into them. Mergers also seemed to be a distant prospect if the component enterprises would not have the means to complement each other and continue a combined workflow.

    Uncertainty about the future:

For the few companies that actually steadied their ship amidst the unprecedented situation, uncertainty about the future in an economic downturn was a significant cause for brows to be furrowed. The future of retail, travel and tourism, energy demand, manufacturing and production, and almost everything was in question. Hence, the organizations that continued functioning lost a lot of their steam and had to tread very carefully.

Prospects of m&a transactions in the immediate future:

However, according to some of the best m&a advisors, the good news is that 2021 seems promising. Although the scare of the COVID-19 pandemic is far from over, with new mutated variants emerging by the day, the industry experts predict that 2021 will be overall a better year for business owners to sell their businesses or acquire new ones. They believe that if business owners follow the trends of 2020 m&a transactions and follow in the footsteps of some of the better deals that transpired, they can make a fortune out of them in 2021.

Some of the better deals that transpired in 2020 in the m&a sector in Dallas:

The Dallas Fort-Worth area witnessed only 43 m&a deals in the second quarter of 2020 that coincided with the middle of the lockdowns. On the contrary, there was an appreciable rise in numbers in the third quarter, which saw 63 deals in the same area. Dallas Fort-Worth was even tied at the number four spot with Los Angeles based on the m&a deal counts and put a lot of big cities like Washington DC, Chicago and Atlanta behind.

        The entire healthcare, biotech, and life sciences sector dominated the m&a transactions and consolidated its position with some exceptional deals that went down throughout 2020. This was propelled by the need to find the cure to the COVID-19 pandemic and the innovations required to create the vaccine.

        The latter half of 2020 saw some of the most illustrious deals in the energy sector that had looked quite pale before this period. Some of the sterling m&a deals included the much-awaited consolidation of Chevron/Noble Energy worth USD 5 billion. The next was the merger and acquisition of the hydrocarbon experts Concho Resources by the largest Alaskan crude oil producer ConocoPhillips for USD 9.5 billion. It led to a flurry of other energy deals like the purchase of QEP Resources at USD 2.15 billion by Diamondback Energy of Midland.

        ITeS and the digital economy soared amidst the pandemic. The shift to the ‘new normal’ witnessed several mergers and acquisitions in the sectors of productivity tools, SaaS, communications technology, and even online dating platforms.

With the help of the right m&a advisor Dallas, any business owner can partner with the right company to set sail in his business aspirations. These advisors have years of experience under their belts and could be the driving force behind such top-tier deals.

Macroeconomic factors at play:

Along with the m&a deals that have already started emerging since the latter half of 2020, several macroeconomic factors affect private companies and influence how they would fare in 2021.

K-shaped recovery:

According to economists and industry pundits, the post-recession period of 2020 has witnessed a ‘K-shaped recovery’ curve amongst businesses. While businesses in the sectors of physical retail, oil, and natural gas, travel and tourism, live entertainment and services like malls, restaurants, and eateries suffered due to the lockdown and quarantine measures, other players encountered a windfall.

These businesses that benefited from excessive user adoption and increased revenue were:

        Telehealth

        Cybersecurity

        Delivery and logistics

        Warehousing

        Ecommerce

        Digital entertainment

        Cloud infrastructure and

        Video games.

Since the stock markets do not always align with the real economy, 2020 saw it recovering quickly and reaching record highs, thereby boosting confidence amongst consumers and reinforcing their spending patterns, which led to increased revenue.

Low-interest rates and government loans:

With low-interest rates, every business can consolidate its position and aim for better growth by earning more from operations, expansions, and inventory while earning substantial profit after paying its premium.

With the increased government stimulus funding, loans are becoming easier to obtain. Thus, private organizations can look for mergers and acquisitions with a renewed vigor.

Conclusion:

2021 has been witnessing vaccination drives across the entire world. But with the emergence of newer viral strains and several roadblocks in the path of vaccination attempts, there is still a long way to go before achieving a 100% successful vaccination rate. Hence, the k-shaped recovery curve will dominate the m&a space, with companies that have benefited from the change in consumer habits likely to be seeking m&a targets. In contrast, those reeling from the after-effects of the 2020 economic slowdown need to measure their steps before treading.

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