PE firms more bullish than corporates on distressed M&A – survey

Mergermarket & CMS
25 September 2020

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Private equity firms still willing to transact in the current market are mostly motivated by turnaround and distressed opportunities, according to the eighth edition of the European M&A Outlook, published by CMS in association with Mergermarket.

Nearly three quarters (74%) of private equity firms surveyed for the report cited distressed/turnaround opportunities as one of the two greatest motivations for acquisitions. By contrast, only 14% of corporate respondents are interested in taking on troubled companies.

The opportunity to secure assets at more favourable valuations was the second foremost motivation for PE players still willing to strike deals (54% of PE respondents).

On the other hand, the main motivation for those corporates still looking to transact appears to be the acquisition of new technologies and corporate venture capital investment (83% of corporate respondents).

The European M&A Outlook 2020 survey canvassed the opinions of 230 senior Europe-based executives, from 170 corporates and 60 private equity firms, about their expectations for M&A in the year ahead.

Respondents to the survey agreed that there will likely be opportunities in distressed M&A – 90% of respondents said there will be an increase in restructuring activity, and 82% expect an increase in corporate defaults.

While distressed activity looks set to rise, respondents are less positive about the prospects for traditional M&A: 74% said the pandemic has lessened their deal-making appetite, with 65% not considering M&A at all, compared to just 45% last year. Correspondingly, only 2% of respondents expect their deal activity to increase this year, in comparison to 27% in 2019. More than half of those surveyed (53%) expect activity levels to decrease significantly during the next 12 months.