This blog is part of our Covid series that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for facilities services and workplace organisations.
These insights are based on our ongoing interactions with organizations operating in impacted areas and our expertise in facilities service growth delivery.
The International Monetary Fund has recently confirmed what most of us already know – we have entered a recession. Given the evolving COVID-19 situation, in the short-term, organisations are doing their best just to implement business continuity plans and keep the lights on. At this point, they simply don’t have the bandwidth to take a forward-looking view.
However, now – or at least very soon – maybe the best time to be bold – to consider the opportunity to slingshot through and out of the recession with a strong M&A strategy.
How we expect the recession to impact this activity
Although this has been an acquisition-rich industry in recent years, everything is completely different now – the post COVID-19 market is clearly headed straight into recession, or worse. If previous recessions are any indication, M&A activity is likely to take a hit. While we believe M&A activity in the immediate aftermath of the pandemic will be subdued, we also believe there will be some interesting opportunities for those willing to invest some thinking and strategizing.
Is now the right time for you to consider M&As?
As the world adjusts to the next normal following the pandemic, some specific technologies/tools are likely to see a surge in adoption, including robotic automation, collaboration and CX, IoT to name a few. These technologies will play an important role in ensuring business resiliency and serving a distributed and remote workforce.
Within this context, a well-planned acquisition strategy can enable competitive advantage for those organizations willing – and able – to take a bold approach. We believe this segment-specific activity will be further fueled by:
- Lower valuations: Most SMEs take a relationship-based selling approach, with about 80% of their revenue coming from a few high-value, large clients or markets. As the recession deepens, SMEs that are highly dependent on a few clients and markets will struggle to survive, lowering their valuation and increasing their propensity to be acquired. The lower cost of capital and the impact of the financial stimulus are also going to provide acquirers an impetus to re-examine their M&A playbooks.
- An opportunity to fill portfolio gaps: As growth across facilities services is expected to soften for the foreseeable future, now may be the time – and the price may be right – for organisations to augment their capabilities, expand their addressable market, and increase their top line
As we approach the fallout from the pandemic, a range of investors will be eyeing the facilities and workplace technology sector for M&A opportunities, and we believe there will be a lot of activity. Picking the right segment bets and timing these initiatives will be crucial.
What is your post-COVID-19 M&A Strategy?
How can we engage?
We like to start with a conversation to learn where you are on your journey and what level of support might work best for you and your organization. Drop me a line – firstname.lastname@example.org