December 1, 2021

COVID-19: Will Omicron Throw a Monkey Wrench into Pending Deals?

In addition to putting a damper on the Thanksgiving holiday & a dent in everybody’s 401(k) account, this analysis from Bloomberg Law’s Grace Maral Burnett suggests that the new omicron variant of the coronavirus just may throw a monkey wrench into some pending M&A transactions:

Given what we’ve seen in response to the declaration of the pandemic in March 2020 and the WHO’s designation of the delta variant as a variant of concern (VOC) in May 2021, it seems conceivable that in the next few months we could see somewhat elevated termination counts. The highest monthly total of terminations since the beginning of last year occurred in May 2020, the second month following the declaration of the pandemic. (Our dataset includes deals valued at $1 million or greater for the control of the company, or for assets to be acquired, that were terminated after the parties entered into a definitive agreement.) And this year, June and July totals went up following the lowest number of terminations seen since the beginning of 2020 in May, the same month the delta variant was designated as a VOC.

Grace says that so far this year, it’s been the biggest deals that have faced the greatest risk of termination.  She points out that while the overall number of deal terminations is down compared to 2020 levels, the dollar volume associated with deal terminations has almost doubled. A total of $321 billion in deals have been terminated this year, which means that the average size of a terminated deal was $1.3 billion. In 2020, $174.2 billion in deals were terminated, with an average deal size of $543 million.

John Jenkins