Here, our panel of experts assess the most important M&A impacts and trends, how they will shape up, and the implications for ICT business leaders and all elements of the M&A model. It is clear that Covid-19 M&A considerations will impact long-term strategies on where to invest and what constitutes a sustainable operating model, while financial backers and acquirers will become more focused and cautious. 

As we head closer towards the post-Covid-19 lockdown era, many existing M&A trends will persist. But our expert panel expects a short-term downturn in deal activity and a return to market strength over the longer term... Dan Freed, Partner, YFM Equity Partners The ICT sector has the potential to be one of the more resilient segments and should bounce back quickly. In the immediate days and weeks after the Covid-19 crisis hit, private equity and banks have on the whole been focused on their existing portfolio of investee companies and borrowers. 

The sector does not appear to have been as badly hit as others so I have not seen a pull back over and above the general more cautious approach that would be expected at a time like this. We’re continuing to see new opportunities and resilient sectors such as comms will be attractive areas to invest. Marcus Allchurch, Partner, Acuity Advisors I have spoken to numerous ICT clients and contacts over the last month, and to over 30 of the private equity houses which have been active providing growth capital into the sector. 

The overwhelming sentiment from a business perspective is positive: In the short-term ICT players are providing a lot of the tools to enable companies, schools etc to operate remotely and there has been a huge push to make that happen. Longer term, discussions are already starting to take place where companies are engaging with their customers to work out what more robust, sustainable solutions ought to be implemented. 

The key risk for most ICT companies comes from the sectors they are ultimately exposed to. Paul Billingham, Director, Knight Corporate Finance ICT businesses will have to be patient when looking for funding and investment over the next six months as institutions focus on existing portfolios, and wait to see the longer-term impact of the economic shock. The majority of high street banks are solely focused on supporting the Government CBILS at the moment and are not considering new opportunities outside of that. 

We have seen almost all high street banks and some private equity houses pause on new funding and investment opportunities, but challenger banks and some private equity houses are still open for business to resilient and key business sectors, and ICT is in that category. 

• Acquirers and investors will be more attuned to how a business may cope under certain future scenarios, such as Covid-19, as well as base their decisions on a company’s past performance. Furthermore, the bar for due diligence is rising with a broader set of factors for growth MSPs to consider... Dan Freed, Partner, YFM Equity Partners Investment criteria for funders are unlikely to change significantly due to the coronavirus pandemic, but there will be an even sharper focus on the robustness and sustainability of companies to withstand the impact of such events. Businesses with high recurring revenues and a good spread of customers across defensible sectors, for example, should continue to be attractive investment opportunities. Also, those that support changes to the way we

work, such as home working, virtual meetings, online consultations, and the accelerated use of data to allow businesses to be more agile, should be well placed.

Paul Billingham, Director, Knight Corporate Finance Moving forward there will be more focus from investors on what sectors an ICT provider’s customers are from, as anyone with a high level of exposure to hospitality and non-food retail, for example, are going to see a number of customers struggle to recover from the crisis. On the other hand, any provider with more of a focus on public sector, financial services and education will be far better placed.