Corporate Lawyers Hit as UK M&A Drops 99% in April
The dealmaking drought made it the worst month since 1985, the latest data shows.
May 01, 2020 at 04:13 AM
3 minute read
Corporate lawyers experienced the worst month since 1985 in April, as the value of U.K. M&A dropped 99% in the midst of the coronavirus pandemic.
Across the month, 35 deals were completed for a total value of £409.1 million — lows not seen since September 1985, when nine deals were done for a total of £269.5 million, according to data from Refinitiv.
The value of U.K. deals fell 99% compared with March, while volumes dropped 84%. Compared with April 2019, values fell 92% and volumes by 87%.
For M&A involving a European target, deals worth £4.9 billion were completed during the month of April, the lowest monthly total since August 1992, though deal-making activity increased by 28% compared to this time last year.
Globally, just nine deals with a value of more than $1 billion were announced this month, compared with 56 in April 2019.
Cross-border M&A transactions have also suffered during the last month, with £14.8 billion worth of global deals announced during April, the lowest monthly figure since February 2002.
The numbers bode badly for M&A departments across London, with many of the U.K.'s elite law firms likely to be affected.
"It's been an April bereft of showers for the rainmakers as coronavirus continues to take its toll on global markets — with the U.K. being hit severely," said Cornelia Andersson, head of M&A and capital raising at Refinitiv, in a statement.
"Over the course of the last 40 years of records, we've encountered a number of unprecedented events and we're now squarely back to the depths of mid-80s where pound sterling was at its most volatile and deal making was essentially stagnant. The full impact of this global economic lockdown on deal making activity remains to be seen, but what is clear is that we've entered our next unprecedented event."
Commenting on the U.K. M&A market, David Pudge, a corporate partner at Clifford Chance, said: "It is hard to predict what will happen over the next couple of months — much depends on when and how the lockdown is lifted.
"However, we may well see more distressed M&A taking place the longer the lockdown goes on and private equity will likely be quicker in terms of switching back to M&A as they generally assess and manage risk more readily than PLCs who have to operate in the public spotlight.
"That said, we can also expect to see strategic deals being done as companies look to combine and consolidate to strengthen balance sheet and/or look to add brands and capability."
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