54% of managers believe that the recovery of activity will not come until 2021.
The health crisis has fully impacted economic activity and affected the vast majority of sectors, but despite the potential consequences of Covid-19, more than half of executives maintain their forecasts and plan to close a merger or acquisition in the next twelve months.
This is one of the conclusions of the EY Global Capital Confidence Barometer survey carried out on more than 2,900 executives from 46 countries during the months of February and March. Specifically, 56% of those surveyed plan to make a merger or acquisition in the next twelve months, considering that, as it happened after the 2008 financial crisis, this situation may be an opportunity to acquire quality assets that promote the business growth in a recovering market.
In this sense, 26% of those interested in closing an operation will do so to acquire technology, new production capacities, or innovative companies; 25% intend to enter new markets; Another 25% opts for concentration and the remaining 24% will do so due to the need to adapt to changes in regulations, taxes, tariffs and for the security of the supply chain.
For the partner responsible for the EY Transactions area, Juan Lopez del Alcazar, the Covid-19 has put on stand-by almost all of the mergers and acquisitions operations that were underway in Spain, although in the renewable and infrastructures some processes remain active. “While waiting for the pandemic to subside and activity to resume, companies need to focus on their operations and cash management,” he adds.
Regarding the speed of recovery, 54% of executives believe that it will be in a ‘U’ shape, with a slow period of activity until 2021 compared to 38% who think that it will be in a ‘V’ shape. For 8% the recovery will be in the form of an ‘L’ and the activity would not pick up until at least 2022.
In this environment, many companies are rethinking their operating models, with 52% of respondents wanting to change their supply chain and 36% accelerating investments in automation. In addition, 70% of organizations are advancing or re-evaluating their digital transformation and 39% actively work on template management.
Regarding the level of impact, not all sectors will suffer to the same extent. According to the report, changes in consumer behavior, stemming from the pandemic, are mainly affecting the automotive, transportation, manufacturing and consumer sectors.
By contrast, media and entertainment, energy and construction and real estate are the least affected.