Mega merger and acquisition deals are “off the table for now,” but companies in distressed industries will likely come together to survive the fallout of COVID-19, says Marc Cooper, CEO of PJ Solomon.
“Mega cap transactions we’ve seen over the past bunch of years, you’re not going to see many of those in the near term,” Cooper told Yahoo Finance’s The First Trade.
“The big bets you could see are going to be more of the heading of mergers of companies coming together to better position themselves, to come out of the pandemic, and be a survivor in an industry that’s being disintermediated in some way,” he added.
His comments were made the same day the European delivery platform Just Eat confirmed it is merging with GrubHub (GRUB) in an all stock deal. The transatlantic deal is valued at $7.3 billion and makes the combined delivery platform the largest, outside of China.
Cooper says retail and oil and gas are some of the industries where companies will likely come together to create savings and synergies.
The health care space, which has experienced a trend of consolidation over the years, will continue on the path.
“You’ll also see in the health care space, ‘buy vs. build concepts.’ So when it comes to drug development, it’s sometimes easier to buy than it is to create a new drug,” said Cooper.
Many health care stocks have rallied amid the pandemic as companies race to create treatments and vaccines for the coronavirus.
“Everyone’s playing the sweepstakes,” said Cooper. “Teaming up and joint ventures and potential acquisitions could be a mode of participation.”
The challenge for deal making is thinking strategically as companies navigates through the pandemic.
“It’s hard then to think out of the box, think strategically, thinking about playing on offense when you have so much to deal with operationally,” said Cooper.
Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre
Put money in the hands of consumers not businesses: NYU Professor Galloway
‘Don’t fight the Fed’ mantra is working: Stifel strategist
It would be unprecedented for a bear market to be this short: Wells Fargo Strategist
Recent rally could be a ‘bear market trap’: Miller Tabak Strategist
Find live stock market quotes and the latest business and finance news