6 minute read 11 Sep 2020
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How the COVID-19 pandemic affects M&A transaction execution

Jeff Leach

EY Americas Business Development Leader, Strategy and Transactions

Strategy and M&A advisor, delivering topline growth and bottom-line results. Dad to twins. Yogi, runner, advocate for the ethical treatment of animals.

Elizabeth Kaske

EY Americas Buy and Integrate Leader

Focused on mergers, acquisitions, divestitures and large-scale transformations. Mother, golfer, runner. Enjoys yoga, wakesurfing and global travel.

6 minute read 11 Sep 2020

The COVID-19 pandemic may have slowed M&A activity, but there are ways to make transactions work, even in a remote environment.

In brief

  • Deals are closing but with more flexible deal structures and virtual post-merger integration.
  • Creative solutions should be embraced to establish and maintain relationships with buyers and sellers.
  • Valuations have largely come down as a result of the pandemic, but closing mechanisms can help bridge value gaps.

In a recent EY webcast, Impact of COVID-19 on executing M&A transactions, 33% of the participants said their companies had closed an acquisition or divestiture since March 15, 2020, when the COVID-19 pandemic began to have a significant impact on US businesses. But there are ways to conduct negotiations, perform due diligence and carry out other work needed to close a transaction, including post-merger integration, in a remote work environment.

“We’re all learning that there’s a lot more that we can do virtually than we ever appreciated,” Chris Rose, Senior VP, Global Business Development, Procter & Gamble Co., said. P&G has closed some transactions during the pandemic, including a divestiture, a small acquisition and some refinancings, he said.

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Building relationships virtually

Rose and three others who spoke about closing transactions and integrating companies during the pandemic said that some of the personal interactions that often make deals happen were at risk of being lost in the virtual environment.

“The loss of that personal connection, sitting in a room with the other side when there is a hard discussion — that we haven’t figured out how to make up for,” Rose said.

Having long-term relationships with the other side can pay off. Sharon Van Zeeland, Director, Corporate Development Operations, Rockwell Automation, noted that Rockwell builds relationships with potential acquisition targets over time. That long-term approach paid off when the company closed two significant transactions during the pandemic.

Rockwell had already signed the purchase agreements before the pandemic hit but found that there were hurdles in executing the deals during the lockdown. One acquisition was in Italy, which is a very face-to-face culture, Van Zeeland said. In both cases, Rockwell found individuals in the target’s country to put on-site during the sign-to-close period to help manage the relationships, while also continuing virtual discussions with management.

In fact, maintaining the personal touch in a remote environment can take a great deal of creativity. EY recently helped facilitate a fully remote transaction close and integration. According to Elizabeth Kaske, Principal, Strategy and Transactions, Ernst & Young LLP, the approach incorporated extensive use of video calls and encouraging one-on-one discussions to build relationships.

There was even more than typical engagement and accountability from C-suite management in the integration, as managers had fewer distractions than would normally be the case, Kaske, who led the engagement, said. Several Day 1 must-have items were also accelerated due to concerns about pandemic-related volatility in the industry.

While the pandemic is making it harder to meet with executives in person, Bradley Brown, Director, Private Equity, KKR, said that he is instead having more introductory calls with CEOs and CFOs, since he is not spending time on an airplane. “It’s a good time to build relationships that will pay off down the road,” he said. KKR has signed and closed numerous deals during the pandemic.

Remote due diligence

Much of the due diligence in an acquisition is already being done virtually, which can help with a remote closing and integration. In the integration that Kaske led, due diligence had been completed and much of the data was already set up in such a way that it could be leveraged into a virtual clean room.

Brown noted that private equity investors are increasingly moving to more data-intensive due diligence, leveraging advanced analytics to assess large amounts of data, often in areas that were previously out of scope for traditional diligence. This includes analysis of computer code and historical transaction-level data, which can all be performed in a remote environment.

Companies have also been creative in managing site visits during due diligence. In some cases, P&G has been able to conduct virtual plant tours when it was divesting, with the buyers being able to ask questions of those conducting the tour. In cases where a physical tour is necessary, P&G has considered a “double signing” period, which would allow it to notify employees of the sale in the timely manner required by labor law, but still giving the buyer a chance to come to the facility and engage with employees later, when appropriate, before the deal closed. The challenge is to “engage with employees at the right time in a respectful manner,” Rose said.

The well-being of employees is at the forefront of dealmakers’ minds. In Rockwell’s case, the company paused its two deal processes when the pandemic hit to make sure that people at the companies, they were acquiring, were healthy and safe and to collaboratively figure out the next best steps, Van Zeeland said.

Board meetings have also become remote during the pandemic, Brown said, noting that he expects that some board meetings will remain remote even after the pandemic.

Uncertainty puts pressure on valuations

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The pandemic has had an impact on valuations, most webcast attendees agreed, though the level of impact varied and 22% said there was no change to valuations from pre-pandemic levels.

For Rockwell, the two transactions it completed in recent months filled a strategic gap, Van Zeeland said. Once the pandemic hit, the company reviewed the deals and decided the upside remained, so the valuations did not change significantly.

P&G’s Rose said that uncertainty was putting pressure on valuations, though smaller companies were being hit more as retailers carry fewer SKUs and consumers focus on well-known brands.

In terms of private equity deals, for the best assets, the price remains the same as it was pre-pandemic, Brown said. Public debt markets have held up, which has taken away some opportunities to acquire assets at a lower valuation. If the buyer is not willing to meet the asking price, the seller will wait.

Brown also said he expected deal volume to increase in the second half of 2020 as people become more comfortable with the situation. He also said there will be some consolidation in industries, with more successful companies acquiring technologies or products to fill in their portfolios.

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Bridging the valuation gap

It is essential to properly negotiate deal terms, such as earn-outs and net working capital. In our webcast poll, these were also the two levers most often named as representing the greatest business risk if not negotiated properly.

Some companies are using these mechanisms more frequently now to bridge the valuation gap, and EY has also seen both an increase in the volume of accounting-related arbitrations for transaction disputes and a decrease in the dollar threshold for these disputes.

Van Zeeland said that mechanisms for a combined sharing of future success, including the use of earn-outs and retention agreements, are being employed more heavily during this time.

There is also more pressure testing on synergy assumptions and more direct conversations about issues than in the past, Kaske said.

“It was really important to not brush anything under the rug because you never knew when the rug was going to pulled out relative to the market,” Kaske said of the deals she was working on.

Brown noted that he has seen a rise in structured transactions for pandemic protection, with sellers often asking to roll over a higher share of the deal consideration in equity.

“Trust is important in this market,” Brown said. “We’ve been getting deals done because people can trust that we are going to show up.”


The pandemic has caused a great deal of uncertainty in the deal market, especially as government lockdowns and company health and safety policies require teams from both sides to work remotely. Despite these challenges, there are ways to complete deals. Acting with integrity will set deal executives up for success longer term.

“How people behave during this crisis will impact their brand after the crisis,” Brown said.


In a recent EY webcast, corporate development and other executives discussed the challenges of and solutions for conducting M&A during the pandemic. While in-person meetings and the connections they foster are missed, there are still ways to establish and maintain relationships, conduct remote due diligence and build in creative valuation structures. Flexibility is key and potential deal partners will remember how companies behaved now when business returns to normal.

About this article

Jeff Leach

EY Americas Business Development Leader, Strategy and Transactions

Strategy and M&A advisor, delivering topline growth and bottom-line results. Dad to twins. Yogi, runner, advocate for the ethical treatment of animals.

Elizabeth Kaske

EY Americas Buy and Integrate Leader

Focused on mergers, acquisitions, divestitures and large-scale transformations. Mother, golfer, runner. Enjoys yoga, wakesurfing and global travel.