Nick O’Donnell, a lawyer at Baker McKenzie, said it feels like businesses are “preparing for possible storms ahead” with deals being tabled “measured and thought-through rather than emotional,” such as spinning off divisions to cut costs instead of pushing ahead with blockbuster mergers.
He added: “I’ve heard the generation before mine say that the real glory deal days were back in the 80s. The move to more remote dealmaking should see a continuation of the journey from those brash dealmaking days to a more calculated approach.”
Dwayne Lysaght – joint head of European dealmaking at JP Morgan, one of the advisers to Liberty Global’s $7.4bn (£5.6bn) agreement to buy Swiss telecoms firm Sunrise this week – agreed that bosses cannot afford any mis-steps and are taking a cautious approach to talks.
He said: “The biggest impediment to deals at the moment is [bosses saying] ‘where do I put my step and where do I judge my own business to be?’
“We’re seeing an increase of stock versus cash with more payouts for milestones, so people are keeping their cash firepower and adjusting the structure of deals.”
As boardrooms think carefully about whether to go ahead with a deal, meaning fewer mergers are getting the go-ahead, the number of takeovers being aborted midway through has plunged.
Just 10 UK deals have been pulled this year according to Refinitiv, the lowest since 2014. The number of ditched deals across Europe is the lowest since 2005.
However, Mr Lysaght said Covid-19 has not completely wiped out deals and he does not expect a dramatic drop in terms of numbers next year.
Santander UK banker Sean Longsdale said there are still opportunities in industries that traded well during lockdown, such as technology and telecoms, and from businesses that will need to sell assets to bolster their reserves after coronavirus.
Jan Skarbek, head of UK investment banking at Citi, said deals in the coming months will come from large corporates offloading non-essential operations. Industry winners will also take the opportunity to pick off weaker rivals, he said.
Earlier this month, bankers said that new rules forbidding lengthy, off-record lunches were making it impossible to spend time getting to know potential clients.
One senior banker said deals were getting done with video conference calls when needed, but largely only where there were existing relationships.