13 Mar 2020
As midmarket advisors who work for clients around the globe, we have keenly felt the repercussions of the coronavirus. Thankfully we have not had any cases among our partners worldwide but the impact on our business is undeniable. Meetings cancelled, conferences postponed, and working from home is a challenge when we pride ourselves on our personal touch. Aside from health worries, we are all concerned about the economic fallout and how the M&A market will be affected. At the same time we are seeing willingness to deal with a new normal and the endless adaptability of all of us under less than ideal circumstances.
All eyes are on China, of course. The country’s draconian preventive measures, with strict quarantines and curfews enforced by facial-recognition technology, and border control, have been effective and there are signs that the disease is on the ebb. We should be confident that normal daily life and economic activities will soon be further restored in China. However, given global markets, the speed and extent of recovery of crossborder M&A will depend on the situations of other economies, especially North America and Europe, China’s largest international counterparties.
Yesterday we held a videoconference for Clairfield’s worldwide partners to hear from our Italian colleagues who have been working from home but are no less active because of that, going to market with a new transaction yesterday and hoping to close several deals that are in the pipeline over the next few months. They firmly support a stay-at-home policy, which we are implementing throughout Clairfield as warranted per country. Our jobs in finance and analysis can easily be done from home with a PC, telephone, and video-conference call systems.
Obviously, the business climate will be affected, and investments will slow. At Clairfield we are preparing for this. “For M&A we are entering winter time. Hopefully it will be a short winter, since infrastructures are not affected, and casualties are limited. That’s the good news,” says Giuseppe R. Grasso, partner in Italy. “In the medium term, the most evident consequence will be the shortening of global supply chains, with Asian suppliers partially substituted by regional suppliers from the same continent. For Europe and the US this will mean reshoring. The increase of demand for products manufactured inside the same continent is good news in the medium term. To make it real and reduce the cost gap with Asia, European and US manufacturing companies must increase their efficiency by investing in automation and in reforms to reduce unnecessary bureaucratic burdens and delays (in Italy we know a little something about this!). In addition, Chinese manufacturing costs are increasing.”
We advise our clients to contact us about the best strategic options in these uncertain times, but stay prepared for business to resume. Put on a brave face for the short term. The mid-term doesn’t look so bad!
Stay healthy and stay at home!