COVID-19 (Corona virus) - consequences for M&A
12 March 2020
At the present time it is not known whether COVID-19 will affect the global economy and the global market negatively in the long term. If so, it might entail a general global recession, also in terms of M&A. However, there is no doubt that COVID-19 is already leaving traces locally and regionally and affects all businesses across the board due to the guidelines issued by the authorities and changed behavioural patterns.
A recession will have a larger immediate effect on small and medium-sized businesses that do not have financial and operational robustness to get through turbulent times, but the impact will differ significantly between various industries. Heading the queue is the service sector which is seeing dramatic falls in revenue just now, including airline companies, travel companies and travel agencies, hotels, restaurants and tourism in general, but retail and consumer goods sales are also affected with historical speed in a turbulent financial market.
Sales processes in progress involving targets in the above-mentioned sectors are thus already affected, for instance by changes in the timing of transactions, temporary suspension or abandonment of the process for the time being. Owners of targets who are or may become affected significantly by COVID-19 and who are contemplating sales will also have to consider their timing carefully in the present market.
Moreover, COVID-19 will affect M&A transactions in all phases, for instance in relation to due diligence, and COVID-19's influence on the company's affairs (financially, strategically, contractually etc), the possibilities of obtaining financing, transaction documentation (effect on ordinary operations between signing and closing, introduction of MAC provisions, potential financing reservations, requirements for break fees, requirements for special guarantees, handling of special risk factors etc) and the negotiation process in relation to which it may potentially become more difficult to find acceptable compromises between the seller and the buyer.
In Plesner's M&A team we are fully aware of the many issues entailed by COVID-19 with respect to M&A and we are prepared to advise about this.
Business insurance
Denmark has imposed an extensive lockdown due to COVID-19 (coronavirus) - for the time being until the end of March. It will of course have major consequences for the vast majority of Danish businesses. This situation gives rise to a lot of questions, and the answers change in step with the authorities' revisions of initiatives and recommendations. Plesner's Insurance team has analysed the situation and has determined that, as a general rule, businesses' standard insurance, for instance all-risk insurance (fire, storm, water damage, operating loss) or general liability and product liability insurance, will not provide coverage in the specific situation involving closure/limitation of activities due to coronavirus. It is possible that certain sophisticated international insurance programmes may cover such expenses but it will require a close reading of conditions.
Sales processes in progress involving targets in the above-mentioned sectors are thus already affected, for instance by changes in the timing of transactions, temporary suspension or abandonment of the process for the time being. Owners of targets who are or may become affected significantly by COVID-19 and who are contemplating sales will also have to consider their timing carefully in the present market.
Moreover, COVID-19 will affect M&A transactions in all phases, for instance in relation to due diligence, and COVID-19's influence on the company's affairs (financially, strategically, contractually etc), the possibilities of obtaining financing, transaction documentation (effect on ordinary operations between signing and closing, introduction of MAC provisions, potential financing reservations, requirements for break fees, requirements for special guarantees, handling of special risk factors etc) and the negotiation process in relation to which it may potentially become more difficult to find acceptable compromises between the seller and the buyer.
In Plesner's M&A team we are fully aware of the many issues entailed by COVID-19 with respect to M&A and we are prepared to advise about this.
Business insurance
Denmark has imposed an extensive lockdown due to COVID-19 (coronavirus) - for the time being until the end of March. It will of course have major consequences for the vast majority of Danish businesses. This situation gives rise to a lot of questions, and the answers change in step with the authorities' revisions of initiatives and recommendations. Plesner's Insurance team has analysed the situation and has determined that, as a general rule, businesses' standard insurance, for instance all-risk insurance (fire, storm, water damage, operating loss) or general liability and product liability insurance, will not provide coverage in the specific situation involving closure/limitation of activities due to coronavirus. It is possible that certain sophisticated international insurance programmes may cover such expenses but it will require a close reading of conditions.
