In the aftermath of the pandemic, companies in almost all sectors could find themselves in severe financial distress, having to decide between exiting the market and merging. Some of these will be under-performing “zombie” companies. Others will fall victim to reduced demand which may never come back.
On the flipside of the obvious challenges, there will be significant opportunities for well-placed incumbents, financial investors and challengers too – especially in “winning” sectors post-Covid such as tech and healthcare.
The checks and balances of the merger control process are never more important than in times of crisis. But we are already seeing signs that, while remaining subject to high standards of competitive assessment, reviews will face unprecedented political pressure. Meanwhile agencies must grapple with the challenges of applying an inherently prospective and potentially lengthy assessment in times when market circumstances can change quickly and unpredictably, and when delay risks value depletion.
“Governments will become ever more involved in deciding the fate of M&A deals, keen to rescue strategic companies and “de-risk” global supply chains. They will be more wary than ever of perceived predatory deals – especially by foreign buyers in important sectors like tech and biopharma.”
Thomas A McGrath
Partner, New York
“Competition authorities will continue to be sceptical of the failing firm defence even in the context of crisis-driven M&A. Dealmakers will need to show with compelling evidence – consistent with their internal documents – that absent the deal the target’s exit will be inevitable.”
Isabel Rooms
Partner, Brussels
Other topics in our series
The sprint towards ever greater state interventionism
14 September 2020
State interventionism is on the rise globally, but what does this mean for companies, especially in the context of the recovery? We expect more foreign investment control and protectionism especially in the tech and healthcare sectors, companies delivering on governments’ sustainability agendas and authorities imposing more invasive commitments. Here’s why.
Competitor cooperation in times of crisis – A chance to reshape the rules?
15 September 2020
Throughout the health crisis, businesses have worked together to ensure uninterrupted supply of essentials – often supported by guidance from competition authorities. But as businesses seek to recover from the crisis and adapt to the altered outlook, what role should cooperation play? And what does that mean for the application of the competition rules?
Capitalising on a crisis – Competition, market power and exploitation
17 September 2020
With our increased reliance on technology and concerns around access to essential products, competition policy is tasked with urgently answering fundamental questions about consumer welfare and fairness. In a way that we haven’t seen before, consumer interests are having an immediate impact on political agendas – with major consequences for competition policy and enforcement.
Explore our Summer’s Top Competition Stories content
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