Down Year Deal-Making

 After several years of furious deal-making in the Valley, 2020 represented a pause. There were no equivalents of Walt Disney Co.’s $71 billion purchase of 20th Century Fox or Amgen Inc.’s acquisition of the drug Otezla for $13.4 billion, both deals from 2019.Data from economic research firm Refinitiv showed a 42 percent decline in the value of mergers and acquisitions during the first nine month of this year. So-called “megadeals” of more than $10 billion declined 33 percent.Overall, the transactions completed this year represented a quick response to the coronavirus pandemic or a preparation for the post-pandemic economy. In the first category, Thousand Oaks-based Amgen signed a collaboration with Eli Lilly & Co. in Indianapolis to manufacture coronavirus treatments, and NBCUniversal in Universal City bypassed movie theaters to stream “Trolls World Tour” directly to consumers, netting nearly $100 million.A report titled “Future of M&A Trends Study” from Deloitte Consulting found that corporations have started to look to the aftermath of the health crisis. While they will continue to make traditional acquisitions, they are expanding the definition of M&A to include related structures such as alliances, partnerships, joint ventures and Special Purpose Acquisition Companies.“Executives are sending clear and strong signals that deal-making — particularly alternatives to ‘traditional’ M&A — will be an important lever as businesses recover and thrive in the post–COVID-19 economy,” the report stated.The Deloitte study polled more than 1,000 executives and found interest in alternative M&A highest in the finance sector, which includes real estate, and the technology, media and communication sector. In both sectors, 50 percent of executives showed interest in non-traditional deals – and both figure heavily in the Valley region’s economy.Mark Purowitz, a principal in Deloitte’s M&A practice, said companies had begun to widen their tolerance for alternative strategic arrangements before this year, “but COVID-19 has accelerated deal-makers’ needs to create more optionality for their organizations.”The Deloitte report noted a major shift away from purely growth-oriented “offensive” acquisitions to a mix of offense and defense. According to the report, “defensive” deals are meant to maintain parity with competing company or prevent deterioration of current weakened market positions.In the post-pandemic economy, companies will seek to “orchestrate a web of multilateral partnerships and alliances” and “curate a portfolio of investments on the ‘edge’ of (their) core business.”Several of the deals profiled on the following pages demonstrate forward thinking. They include Warner Bros.’ construction of 800,000 square feet of office space while trading off other real estate; Simulations Plus’ acquisition of a French software firm; and Beyond Limits’ $133 million in venture capital to build out artificial intelligence for industry.  – Joel Russell