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Merger and Acquisition Research: April 2020 Stats Confirm Slowdown

Business merger and acquisition (M&A) deal activity worldwide slowed substantially during the week ended April 12, 2020, compared to weekly averages in Q1 2020, according to GlobalData’s deals database.

Many buyers, sellers and negotiators are pausing deal discussions as businesses across the globe seek to better understand how the coronavirus pandemic will impact near-term and long-term revenues and profits.

According to GlobalData’s research findings:

  • 899 deals were announced globally the week ended April 12, 2020 — down 17.2% compared to 1,086 deals the previous week.
  • March 2020 saw an average of 1,322 M&A deals per week.
  • Q1 2020 saw an average of 1,438 M&A deals per week.

Channel Partners, MSPs and IT Consultants: M&A Update

The global M&A slowdown mirrors recent coverage on ChannelE2E — which has been tracking about one channel-focused M&A deal per business day in April 2020, down from about two to three deals per day in Q1 2020. (See ChannelE2E’s complete list of MSP, VAR and IT consulting firm buyouts for 2020.)

No doubt, some deal flow continues — though negotiations can be a bit more challenging amid social distancing practices. In a mid-March interview, Evergreen Services Group explained how it was proceeding with MSP investments and acquisitions — though certain steps would surely take longer.

Big global systems integrators also remain in acquisition mode. Accenture, for one, has an acquisition budget is $1.6 billion for fiscal year 2020. As of mid-March, the global IT services provider and consulting firm had spent $584 million on 17 acquisitions in its current fiscal year.

And in April 2020 — even as the pandemic spread across North America and Europe — Accenture acquired a B2B marketing firm, as well as Revolutionary Security.

Can MSP Valuations Hold Up Amid Revenue Pressures?

Still, Q2 2020 will likely be an extremely challenging quarter for MSPs and other types of channel partner businesses.

As the pandemic continues to pressure business worldwide, the managed services market will likely decline 17 percent in Q2 2020, before rebounding in the second half of 2020, according to the ISG Index research report.

Roughly one-third of channel partners have two months or less in cash reserves, but 57 percent of partners believe they will meet or beat their original 2020 revenue plan, recent research from The 2112 Group reveals.

Amid all those variables, ChannelE2E expects deal flow to slow quite a bit throughout Q2 and Q3 2020, with valuations to remain under pressure through 2021. Before the pandemic arrived, MSPs were typically valued anywhere from 6X to 10X annual EBITDA. We suspect those multiples are slipping, and some deals likely involve less guaranteed money at the time of sale.

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