The M&A Watch is a quarterly publication offering analysis of the marketplace and climate for middle market mergers, acquisitions and strategic transactions. The goal of this publication is to arm business owners and other parties with insight to help prepare for such transactions in order to maximize transaction outcomes. If you are interested in reading previous reports in addition to downloading this current issue, login to the M&A Watch page.

M&A deals slowed significantly or stopped entirely with U.S. shutdowns in March 2020. M&A activity hit bottom in April 2020 before bouncing during the summer. Over the course of the year, most deals went completely virtual, and financial buyers outnumbered strategic buyers over the summer. By the end of the year, however, strategic buyers were interested in M&A again.

Pursant flagged some notable changes in the M&A world toward the end of 2020. Business owners are showing fatigue as a result of managing through the COVID-19 pandemic, whether their business fared well or not. The pandemic has served as a catalyst to stimulate business sale and liquidity event activity. Additionally, COVID-19-related earnings bumps and earnings reductions have created extra diligence challenges for parties.

Here are a few predictions for M&A in 2021:

• M&A activity will be at very high levels, making up for lost ground in 2020;
• There will be more buyers with healthy, stimulus-fed balance sheets; and
• There will be more 2021 sellers due to imminent 2022 tax increases.

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