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M&A Capital Markets Update Q1 2020

“The good news is that there is still significant capital in the debt markets available for the right situation. Borrowers may be forced to look at alternative options that potentially have a higher cost, but these facilities often come with more flexibility built around cash flow. We are actively being contacted by funds looking to put capital to work with flexible structures.”           Jon Wiley – Head of Forbes M+A Capital Formation 

In Q1, we have seen the impact of COVID-19 on the M&A Landscape:

  • Overall M&A decreased in 1Q and by the end of March deals were at a standstill
  • After reaching an all-time high in fundraising in 4Q 2019, private equity fundraising slowed to $45.2B in 1Q 2020
  • Cash balances of the S&P 500 increased nearly 50% in 1Q 2020 compared to the previous quarter as companies cut spending, put acquisitions on hold, and braced for potential fallout from COVID and the global economic uncertainty
  • Businesses have drawn on available lines of credit, over concerns of potentially losing access to credit, causing a liquidity crunch for banks
  • Lenders are taking on higher risk levels resulting in increased underwriting standards to balance their portfolio
  • Transactions are moving forward, but borderline deals are being pushed to the next tier of lenders and increasing the cost of capital for these borrowers

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