Crash, Bang, Sanction – How the Russian-Ukraine war affects Mergers and Acquisitions
After the shock to the system that was the COVID-19 pandemic, the global economy seemed to be healing. This has especially been the case since late 2020 into early 2021, with last year being the best year for M&A, with a new deal value of nearly £4 trillion for the first time ever. However, with stocks down across the globe, oil prices up, rife inflation and, sadly, a new migrant and potential humanitarian crisis in our midst, not to mention the future of Europe hanging in the balance as we speak, a new-found uncertainty is suddenly the new normal. Lets look at how the Russian-Ukraine war affects Mergers and Acquisitions.
The level of economic sanctions being applied by world governments and banks is unprecedented, but taking out half of 2% of the global economy will not impact all of us beyond the deep human cost. However, it is better than the alternatives and may yet achieve its objectives. The growing uncertainty undoubtedly deters some from M&A as leaders – or more so their financiers and risk managers, hate volatility and loathe any bumps in the road.
Therefore, what is the impact of this for M&A in 2022 and beyond? Do we know how the Russian-Ukraine war affects Mergers and Acquisitions? Well, In the end these levels of economic disruption all create drag, which means that growth increasingly becomes a pipedream as companies are further squeezed and backed into a corner. Add to that tax increases and more sellers will decide that enough is enough at a far quicker pace, and equally, buyers will be forced to consolidate just to make headwind in the economic gale. In conclusion, M&A will spur forward as the more guaranteed route to the top than organic growth.
Private Equity and The Future of M&A Moving Forward
Superabundant capital from Private Equity also adds to the equation. With investors and companies striving to secure returns on capital it is likely that M&A in the emerging mid-market will remain a good bet – for now at least. Activity levels remain at a high – unlike for some of those London estate agents who have seen Russian buyers rapidly drop out.
Ultimately, the situation is ever-changing, what is true today may not be true in a couple of weeks time or a few months time. Time will tell how the Russian-Ukraine war affects Mergers and Acquisitions. The true cost of this new European war still remains to be seen – in humanitarian terms it’s a catastrophy, but in economic terms or at least in relation to M&A, it may not have such a great impact. It is also possible that the new global teamwork and revitalised NATO and European co-operation will regenerate economic growth in the long-term as ‘the West’ wakes from its distracted navel gazing and lethargy.
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