M&A market outlook – what to do now and what to expect to happen

2020 was a better M&A year than expected. Although, the number of M&A deals dropped in Q2 and Q3 compared to 2019. In some industry sectors, 2020 was a better year than many people expected.

Technology Segment maintained its positive climate, and because of the number of deals in Q4, it grew compared to 2019. In some areas, the valuations continued to grow. Software companies were good examples of those.

In general, businesses with ongoing or/and long-term contracts with low churn rates maintain and often increase valuations.

A growth year in M&A or not

2021 was forecasted to be a growth year in M&A. Over 50% of interviewed M&A advisors anticipated in December that 2021 will be a growth year (source Merger Market). S&P Global’s Technology Trends seminar confirmed the same view on the 4th of February.

However, that trend was not visible in January. And now, at the beginning of February, it looks like only the uncertainty in the market is growing. There are many reasons for it, like difficulty to predict own business, delayed delivery of vaccinations, and Wallstreetbets Impact on stock markets.

One area where M&A advisors saw growth has also taken place. For businesses facing challenges and looking to restructure, divestments have been growing, and that trend will continue at least next quarters. It seems that debt financing has started to grow. No doubt, these growth trends will continue throughout 2021. There will also be companies that will go to bankruptcy.

A clear need to move on

There is a clear need to move on and make decisions even though the market is uncertain and changing. Companies should grow organically or inorganically, and PE houses should find good investment targets. Distressed companies should sell some parts to survive.

It is not time to wait and see, but it is time to decide and execute based on the strategy and available options.

The latest estimate from S&P Global tells that the IT sector’s financial trends compared to 2019 will the following.

• Software companies will continue to grow their revenue and EBITDA compared to 2019.
• Hardware companies’ numbers will decline.
• IT services will be on the same level as 2019.

Naturally, financials will reflect on valuations.

What else can you expect in 2021?

For sure, the uncertainty will continue, and changes will be more extensive and faster than before. Can you be well prepared for coming changes, most likely not?

What you could and should do, is to be fast to adjust to changes. If it is time to sell, sell. If there is a good acquisition opportunity, analyze and make the right decision promptly. You should consider not just keeping your cash in a bank account and wait for a more “normal” market situation.

Our advice to you is to be proactive and build businesses that generate better results because now it is time to make a difference in every industry. That we had as the business as usual before Covid-19 will never come back. Shareholders want to see growth in profitable areas and divestments in non-core business areas.

How can we help you?

We can help you to make the right decisions. It is good to test your ideas by talking with an M&A professional who is also an experienced business leader. Like we are.

You can grow your company via the right acquisitions. We can help you to brighten your company’s focus by selling non-core businesses to someone else.

Get familiar with our M&A Advisory Services – give us a chance to help you come out to the new normal as a winner.


Jarmo Kuusivuori

Views on acquisitions

M&A market outlook 2022

M&A market outlook 2022

After the highly volatile year of 2020, the global mergers and acquisitions (M&A) market has reached record levels in the year 2021. The...

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