Conventional wisdom holds that mergers, acquisitions and other deal activity likely will plummet in an economic downturn, especially after record highs in M&A volume and a wave of stratospheric transaction values in recent years. Concerns of a steep drop-off are understandable. That’s what happened in the Great Recession, and the dot-com bust before that.
But the expectations of M&A’s demise may be exaggerated. While deal volume has declined recently, fears of a full collapse similar to previous cycles may be premature. In short, a combination of factors has been driving a decoupling of deals from the broader economy. That decoupling is different from past cycles, providing a higher floor that should prevent deal activity from evaporating.
With this anticipated resilience, prepared corporate and private investors don’t have to fully retreat in this downturn. As our research shows, organizations that make deals in a recession actually could outperform their industry peers.