50 (145) 2021

Lessons from the Pandemic

Doing M&A transactions in uncertain times: lessons from Covid-19

By Adam Zohry, executive manager – Financial Advisory Department at Mazars in Poland
Header a zohry colour

Covid-19 was declared by the World Health Organization (WHO) as global pandemic in March 2020. The first few months following that outbreak were marked by a strong level of economic uncertainty worldwide, with direct consequences on mergers and acquisitions (M&A). Some ongoing transactions were put on hold, other cancelled, buyers who had already signed an acquisition deal tried to renegotiate the terms of the agreement or even withdraw from it. At that time, the absolute priority of companies all over Europe (including the UK and Poland) was to ensure first that the resilience, protection and continuity of their business will be guaranteed, through appropriate crisis management procedures and decisions. From summer 2020, the M&A landscape began to improve significantly, with an increasing appetite for deal-making on the markets, and the pandemic crisis turning into an opportunity for many investors. Today, many lessons can be learned with respect to M&A transactions and related processes during that period.

An impact on M&A working environment

M&A is a labour-intensive activity that requires much diligence, evaluation and collaborative effort across several organisations, multiple negotiation sessions, site visits to assess physical assets, evaluating markets and sifting through thousands of documents. Unlike in past events that have affected deals and activity (for example the 2008 sub-prime mortgage crisis), Covid-19 has disrupted the manner in which transactions are developed and negotiated. The need for social distancing and the limits placed on travel made the deal-making process and related M&A and due diligence advisory more challenging.

Fortunately, technology acted as a catalyst for change, creating efficiencies that had not existed before. Building trust and hammering out deal points remotely through video conferencing providers like Teams or Zoom had become a standard practice, which was hard to imagine before the Covid-19 outbreak. The effective use of new and creative collaborative tools and techniques have become more critical as buyers, sellers, providers of M&A financing – and all of their respective financial, tax and legal advisers – adjusted to the changed environment.

An impact on M&A deals

Covid-19 pandemic also influenced the deals themselves. Indeed, for some companies, M&A may be the more efficient way to adapt to the Covid-19 and post Covid-19 world. Sectors like healthcare and pharmaceuticals, life sciences and technology were particularly attractive for financial and strategic investors, and will most probably remain a primary focus for deal activity events after the end of the pandemic. Many firms active in the manufacturing industry were also forced to reconsider their supply chain from a resilience point of view, rather than just cost efficiency.

In that context, for international investors, Poland in particular and Central & Eastern Europe in general proved to be an interesting alternative to China and South-East Asia. Thus, based on Investing in CEE inbound M&A report 2020/2021 published by Mazars in collaboration with Mergermarket, Poland ranked first in Central Europe in both deal volume and aggregate value terms in 2020. Total disclosed deal value rose 41% year-on-year to €11.2 billion, an impressive performance given the impact of Covid-19, though volume fell to 124 deals, from 154 in 2019. Four Polish deals ranked in the top ten deals of the CEE region (excluding Russia). Poland’s biggest deal of the year saw French telecoms operator Iliad acquire Polish telecoms operator Play, the mobile market leader in subscription terms, for €3.7 billion. Iliad acquired Play from its reference shareholders, London-based, Icelandic-owned fund Novator, and Greece’s Olympia Development. As we can see, even in the face of headwinds caused by the Covid-19 pandemic, M&A deal-making in Poland remains robust in comparison with other emerging countries, thanks to the strong fundamentals of the Polish market.

An impact on M&A advisory exercises and related documentation

The Covid-19 pandemic reminded investors and advisors of the inherent difficulties in factoring the impact of a crisis into financial forecasting and asset valuation exercises. As shown in the Forecasting your financial performance in a time of crisis, Mazars’ experts report the value of an asset is indeed intimately linked to its ability to generate future probable gains: however, in times of crisis, the future appears much more uncertain and the field of possibilities is much wider. Similarly, in such times, common forecasting and valuation approaches present their own set of difficulties. On one side, market-based approaches are influenced by highly volatile market data and fragmented information on listed companies. On the other side, income-based approaches face two major problems: the ability to re-forecast in a context of uncertainty; the uncertainty over the level of risk associated with these forecasts, and to what extent any risk premium should be applied when using them as a basis for valuation. Not all valuation exercises can be postponed until a business gains visibility of when a crisis will end. On the contrary, the performance of some valuation exercises can have major knock-on effects: for example, impairment tests on goodwill, for which impairment losses are recognised by companies, are irreversible.

The legal content of transaction documents has also been influenced by the pandemic and related specific allocation of pandemic-related risks in purchase agreement. For example, one of the key impacts on M&A deal-making relates to material adverse change (MAC) clauses. This provision, in the context of a transaction, gives a purchaser the right to terminate if, between signing and completion, an event or development occurs that has, or is expected to have, a materially adverse effect on the target company.


To conclude, we can say that Covid-19 significantly impacted the M&A market in Poland and worldwide. While some of the consequences will be temporary, others are likely to be durable, with business behaviours, working practices and market trends remaining the ‘new normal’ even after the pandemic. Thus, the level of face-to-face meetings and physical business trips by car, by train or by plane will most probably be significantly lower than during the pre-Covid-19 area. Nevertheless, physical diligence for a few critical parts of the M&A process will be still necessary, especially in the context of site visits and final closing of the deals.

In terms of deal-making, the perspectives for upcoming months are relatively positive: the outlook is for a promising 2022 year, supported by further roll-out of vaccines, as well as continued government and European support for the Polish economy. The country is well-positioned to benefit from the post Covid-19 period, with industrial nearshoring, succession planning, PE funds activity, the shift towards renewables and further market consolidation in selected sectors being the main drivers of that trend.

More in Lessons from the Pandemic:

What does the future look like for offices? Global real estate services firm Cushman & Wakefield presents the findings of its proprietary survey of office tenants

By Jan Szulborski, senior consultant, Consulting & Research, Cushman & Wakefield

The office market is now at the epicentre of changes caused by the transition to the remote work model due to the Covid-19 epidemic. However, with the epidemic situation improving, organisations have already commenced planning the return of employees to the workplace. The analysis of the findings of a survey of tenants of the office buildings in the portfolio of properties under management of Cushman & Wakefield Poland reveals how companies are preparing for this change.

Hotel services during a pandemic

By Piotr Cwojdziński, CEO, Exclusive Aparthotel Sp. z o.o.

The pandemic hit us by surprise and the scale of the situation was unexpected for the entire hospitality industry. The numerous restrictions imposed by governments forced us to adjust to formal requirements to be able to conduct business, making us more flexible in terms of customer acquisition as a result.

The impact of the Covid-19 pandemic on team management and client relationships

By Dr Ewelina Stobiecka, managing partner in the Warsaw office of Taylor Wessing

Team- and client-relationship management underwent an accelerated evolution during the pandemic. Practically overnight, business leaders were challenged to adapt to new conditions. Also, the legal business – in my opinion – underwent a faster transformation and moved both internal and client relationships to a different level.

Delivering what matters

By UPS Poland

During a period of unparalleled activity, when the pandemic spread leaving national economies and businesses counting the costs, UPS has been a proud and trusted partner of governments and business alike as we continue to deliver what matters in a safe and reliable manner. Whether that is lifesaving vaccines, or Christmas gifts, UPS is continually investing in its smart global logistics network to provide choice, convenience and control in an uncertain business environment.