Kareem Abdul-Jabbar, one of the greatest basketball players of all time, amassed six championships during his career in the National Basketball Association, and scored 38,387 points (an NBA record). What is often overlooked, is that during his career, he also collected 17,440 rebounds (3rd all-time in NBA player rankings), which allowed him to grab the ball after anticipating a missed field-goal attempt, and use the second-chance opportunity to score the basketball. Much like Kareem did for the Milwaukee Bucks and Los Angeles Lakers, the same is true of today’s recovering M&A market, which following Covid-19’s interruption and consequential decrease in activity, is expected to rebound substantively in terms of increased transactional movement, and provide active players in the market with a fresh second-chance opportunity to remedy the shortcomings of 2020.
It can be considered that the rebound in M&A activity may have commenced as swiftly as Q4 2020 - specifically in the retail industry, a sector currently experiencing mass consolidation, which saw, and continues to see, various high profile acquisitions. In addition to this, there are numerous factors and trends which may encourage optimism in the belief that the rebound in M&A activity will continue to increase during 2021, including but not limited to:
(i) increased shareholder activism seeking to continuously provide effective oversight and accountability over corporate executives and boards of directors trusted with filling the void caused by Covid-19 with new growth and performance, or encourage alternative reassessment of business strategies (including potential divestitures seeking to increase capital reserves and/or liquidity in exchange for dispensing with certain high-value none-core business components and/or assets);
(ii) bullish private equity firms in search of distressed corporations and businesses capable of being pursued by way of a hostile takeover bid or otherwise;
(iii) greater political stability and certainty following the change of administration and new political leadership in the United States of America (and forthcoming adoption of unprecedented ~USD 1.9 trillion governmental funding and relief packages);
(iv) stable and/or profitable corporations with high capital reserve funds (specifically technology companies and financial services firms) looking to either pursue new investment strategies (following extensive Covid-19 driven changes in consumer behaviour, and their generic digital transition, including e-commerce alternatives), or alternatively (now in the absence of any deal-making restraint), simply reverting back to previously suspended projects and transactions which were in the pipeline prior to the outbreak of the pandemic;
(v) corporations’ pursuance of alternative deal making models (via special purpose corporate vehicles), specifically in the form of joint-ventures, partnerships and/or strategic alliances with the intention of diversifying risk (following their adoption of conservative strategies to assist in weathering the Covid-19 storm);
(vi) increase in large multinational and intra-group restructurings seeking to clear and remove otherwise dormant/outdated entities in order to optimise corporate structure efficiencies, namely: (a) reduce non-essential maintenance costs, risks of non-compliance and/or exposure to potential liabilities; (b) investment and allocation of resources and time management in working with specific professional intermediaries in jurisdictions where essential subsidiaries continue to operate; (c) streamlining of group operations in order to optimise intercompany arrangements such as cash and/or asset repatriations; and (d) attendance to general clearance of any superfluous aspects in order to improve structure perception and credibility to third parties in order to attract new investment (whether by way of a simple injection of capital, a wholesale acquisition or potential legacy spin-off); and
(vii) from a holistically communitarian perspective, it appears that global economic recovery generally is at the top of everyone's wish lists for 2021, and the collective shift towards post pandemic recovery (given that we appear to be at the beginning of the end of Covid-19), may well (albeit subconsciously), encourage the players in the market to pursue new endeavours (which together with a ‘let’s get back to business mentality’), will increase the amount of activity in markets generally.
Ultimately, and (to an extent) Covid-19 permitting, 2021 may indeed live up to its potential in terms of the anticipated rebound in increased M&A activity. Importantly, the same promise is true of a jurisdiction such as Gibraltar, which has firmly hit the ground running in 2021 by the announcements of both its reciprocal UK market access exclusivity passporting arrangements for financial services firms, and watershed announcement of an in principle agreement regarding its prospective adoption of the Schengen acquis. Overall, Gibraltar remains a progressively stable jurisdiction of relevance and choice, and offers a plethora of legal options and mechanics (with unparalleled speed-to-market capabilities) primed to assist with any corporate and commercial aspects poised to take advantage of the rebounding effect of the 2021 M&A market, (including cost and time efficient processes such as: establishment of SPVs, swift corporate restructurings, member’s voluntary liquidations, and redomiciliations).
Accordingly, much like Kareem Abdul-Jabbar showed us, it is essential that we take the necessary steps, be ready to anticipate that rebound, and put ourselves in a position to take advantage of the second-chance opportunity coming our way, whether it be in professional basketball, or in corporate M&A markets.
Conditions ripe for already resilient M&A activity to accelerate in 2021 and beyond.