Blessing In Disguise: Did Covid-19 Pandemic Make International M&A Easier?

An Interview with Eric Korsten, Senior Managing Director of Branford Castle Partners

For Eric Korsten, a senior managing director for Branford Castle Partners in New York, international deals used to entail extensive traveling. That changed with the Covid-19 pandemic. Korsten realized it a few months ago when his company helped a U.S.-based company acquire a Switzerland-based firm.

“In normal times, we would have had to travel back and forth in between the United States and Switzerland,” he told me in a recent Zoom chat, explaining that while the novel Coronavirus produced unprecedented challenges, it also created “opportunities” for dealmakers.

“Obviously, during COVID, travel was essentially blocked for those travel routes. What this meant is that everybody involved in the transaction was basically sitting by their computer 24/7. It made it a lot easier to convene groups of people at any hour because everyone was just available,” he added.

Korsten explained that travel restrictions meant the deal could be completed almost entirely online, something people in the industry did not think was possible before.  There was a lot to consider: time zone differences, the need to meet in person physically, or other logistical challenges.

“I think one thing that benefited us is we actually had an in-person meeting prior to everything happening, so we did have that personal connection beforehand going into all of this,” he said, adding that the rest of the deal-making occurred virtually.

“When you take out having to do international travel and can be sitting at your desk in real-time having conversations with the other side, the seller of the transaction, their professionals, your professionals, any combination of that. It really took what normally is challenging and made it a little easier,” he said.

The pandemic brought everyday life to a standstill, with bars, restaurants, and movie theaters closed in the U.S. and worldwide as millions of people died. Covid was largely bad for the economy even though some sectors such as M&A have witnessed a boost. Deals have reached an unprecedented amount, with $2.5 trillion announced so far in 2021, which is expected to be the most active year of all time. Large private equity firms, including Branford Castle Partners, have begun spending their dry powder, securing over half a trillion in deals in the past six months.

International M&A, however, can be more complex than domestic deals. For example, currency fluctuations can significantly impact returns for international acquirers due to the increased risk of volatility in foreign markets. Korsten advises companies to build in a hedge against currency risk.

“In this environment, the volatility of the markets, currency can move significantly. Even relatively stable currencies like the Swiss Franc,” he said.

“They can ultimately change the purchase price for you so as a deal gets more likely to close, you know, considering hedging can really protect yourself against what can be pretty violent moves in the market. A 2% move in a currency can be a big deal. Small funds should think about what hedging options and strategies might be used when a deal becomes solid, he added.

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By Lou Sokolovskiy, Founder & CEO at Opus Connect
July 2021