Suddenly the music has stopped for dealmakers. Mergers and acquisitions, mainstays of consultancy work, are no more resistant to coronavirus than the rest of the global economy.
But the decline in transactions has led businesses to focus their attention elsewhere — in particular, on how to survive and potentially thrive once the recovery comes.
Worldwide volumes of M&A activity were down nearly a third in the first three months of the year compared with the same period in 2019, according to Refinitiv, the financial data provider. Asia Pacific experienced a 17 per cent drop.
Emerging markets are now growing at their slowest pace since records began and experts predict flat growth at best and declines in gross domestic product in some cases. Rating agency Fitch has forecast anaemic GDP growth of 0.8 per cent for Turkey this year, while it expects South Africa’s GDP to fall by 3.8 per cent and Russia’s by 1.4 per cent.
According to Fiona Czerniawska, co-founder of Source Global Research, which advises the professional services industry, the sudden fall in deals is not the prelude to a V-shaped recovery, where the economy suffers a sharp drop followed by an acute rise, but rather to a U-shaped upturn, in which activity picks up more gradually.
In part that is because of the constraints imposed by social-distancing measures. “It is much harder to build trust remotely,” says Ms Czerniawska. “In a lockdown it becomes much harder to go beyond the people that you know already. Consultants need to demonstrate that they don’t just bring advice but that they have been involved in developing results in the past.”