Economic highs follow pandemic lows: What history can tell us about what’s now and what’s next
Saving, systematizing, solving. From an economic boom to progressive social change – we’ve seen this before.
Called the ‘perfect storm for dealmaking’, M&A activity is being fuelled by cheap capital, more political certainty with the vaccine, and pandemic fallout as businesses regroup and shift their strategies. It’s a combination of all these factors that is raising confidence and presenting the ideal climate for growth, which has led to a booming M&A market.
According to Dealogic, more than AU$83 billion of deals were announced in the first half of 2021, breaking records for the past five years and creating the ‘seventh great M&A wave’ of the last two centuries.
Beyond the financial rebound, the pandemic has also spurred broader progressive change, giving people and businesses alike a renewed focus on positive social impact and driving governments to shift their priorities. In short, a focus on a better future.
Turning to the past for answersThe Economist shines a light on some of the lessons we can take from past periods of upheaval. ‘People spend more, take more risks - and demand more of politicians’.
Their research shows that after periods of non-financial disruption, including wars and pandemics, GDP has a tendency to bounce back. And in the case of COVID, it could bounce back significantly.
Consumers have fewer opportunities to spend in such periods, therefore save more. The reflection brought about by such disruption makes people willing to look at things differently. They seek new opportunities and better ways of working, especially those that leverage new technologies.
‘Economists have drawn a link between pandemics and the use of labour-saving technology’ (Economist). They cite the rapid automation growth of the ‘roaring twenties’, which saw the advent of mass production, mass marketing and mass communication off the back of World War I and the Spanish flu outbreak.
While the post-COVID evidence is anecdotal at this stage, it’s clear that automation and digitization will play a critical role in driving growth - including the fast and secure facilitation of end-to-end M&A processes.
Shifting valuesPost-pandemic history also shows us that as inequality is exacerbated, politicians are held more accountable for social change. ‘When people have suffered in large numbers, attitudes may shift towards workers’, which can account for rising wages and political unrest.
We’ll continue to see ESG be a top concern for policy makers in the coming months (and years).
The same is true for socially responsible buyers and investors. EY’s 2021 Global Private Equity Divestment Study shows that private equity exits will accelerate post-pandemic, ‘fuelled by higher deal valuations offered by SPACs and buyers’ willingness to pay an ESG premium’.
According to the survey, PE firms are actively courting potential buyers with a strong ESG record, with social impact policy – including diversity and equality commitments – a critical area of focus.
So what’s next?While history can show us that what we’re experiencing is nothing new, how long the current boom will last remains uncertain.
What is certain is that data-driven businesses - those that prioritize the digitization and automation of manual processes - will benefit the most in this era of unparalleled digital growth, with the ability to turn data into quick decisive action and adapt to the changing market. This same data can give them visibility over ESG concerns so that social impact can be tracked, measured and evidenced, metrics which will become increasingly critical to success.
The time to act on this historic boom is now. Ansarada Deals is a total transaction management solution encompassing world-first AI features and analytics for deals. Take advantage of the ‘seventh great M&A wave’ and bring your M&A processes into the digital age.