Accelerated trend to increased capital efficiency
Most respondents stated they are placing a greater focus on capital structures, capital efficiency and funding models. Capital structures will need to be revised and executives are increasing the frequency of their strategic reviews. As companies seek to reallocate capital to enable business continuity there will be the need to assess their portfolios and potentially divest non-core assets and businesses to fund their ongoing operations. Decisions made now need to address the current needs of the business but also enable responsiveness and resilience in the future.
Impact of continued, heightened lack of global cooperation
The ongoing challenges created by geopolitical tensions and the general lack of global cooperation continue to be front of mind for technology executives. Thirty-five percent feel they have not responded well to geopolitical and regulatory changes in recent times, and for most, this will become more complex and challenging. As countries start to ease restrictions after historic stimulus injections, sovereignty will be a core focus, particularly as countries follow their own recovery playbooks. Significant cross-border uncertainty will remain for some time, and the impacts on supply chain, regulatory M&A approvals, trade barriers and skills shortages are unclear at this stage.
In the immediate future, business resilience will be a key factor in evaluating targets. The initial shock of the COVID-19 outbreak has paused and delayed many deals. However, as executives shift their mindset from crisis management to strategic execution, M&A is expected to be a key lever that well-capitalized companies will use to accelerate recovery. While most valuations are generally depressed and could create opportunities, there is also an increased business resilience risk. Thirty-nine percent of technology executives flagged “business resilience of targets” as being the biggest factor in future M&A strategies. Going forward, it will be imperative to use appropriate rigor during due diligence.