We conclude our special series, “Five Biggest Private Capital Surprises of 2020,” with:

Surprise #5: The M&A Big Bang

Last July we published a white paper (see “COVID-19 and M&A Activity”) showcasing conversations with leading middle market investment bankers. They reported distinctions between businesses hit by the pandemic and those depending less on the consumer showing up in person.

The “haves,” they told us, could be sold at Ebitda multiples exceeding pre-virus levels. The “have-nots” would be challenged to transact at any price.

Besides logistical challenges (“Few sponsors will invest in any new platforms without personally meeting management”), there were worries about second and third infection waves. “We’re expecting a light second half,” one banker told us. Others thought tax concerns would drive selling decisions, with accumulated sponsor dry powder providing the engine.