Playing politics with distressed M&A

In the aftermath of the pandemic, companies in almost all sectors could find themselves in severe financial distress, having to decide between exiting the market and merging. Some of these will be under-performing “zombie” companies. Others will fall victim to reduced demand which may never come back.

On the flipside of the obvious challenges, there will be significant opportunities for well-placed incumbents, financial investors and challengers too – especially in “winning” sectors post-Covid such as tech and healthcare.

The checks and balances of the merger control process are never more important than in times of crisis. But we are already seeing signs that, while remaining subject to high standards of competitive assessment, reviews will face unprecedented political pressure. Meanwhile agencies must grapple with the challenges of applying an inherently prospective and potentially lengthy assessment in times when market circumstances can change quickly and unpredictably, and when delay risks value depletion.

“Governments will become ever more involved in deciding the fate of M&A deals, keen to rescue strategic companies and “de-risk” global supply chains. They will be more wary than ever of perceived predatory deals – especially by foreign buyers in important sectors like tech and biopharma.”

Thomas A McGrath

Partner, New York
Thomas McGrath
Isabel Rooms

“Competition authorities will continue to be sceptical of the failing firm defence even in the context of crisis-driven M&A. Dealmakers will need to show with compelling evidence – consistent with their internal documents – that absent the deal the target’s exit will be inevitable.”

Isabel Rooms

Partner, Brussels
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