All signs point for strong M&A activity in the second half of 2021, with the economy rebounding from relaxed Covid restrictions. “It is busier than I have seen it in recent memory,” PJ Solomon CEO Marc Cooper tells Mergers & Acquisitions in this Q&A.

Talk about the current dealmaking environment.

Right now, the dealmaking environment is red hot. I do not see that momentum slowing down anytime soon. Clearly, the rise of SPACs in Q1 has attracted new investors, and we are seeing M&A at a global level surpass 1980-level activity. Companies today have strong balance sheets, abundant debt capital and low borrowing costs. Combine that with historically high dry powder in the private equity space, plus momentum in the IPO and SPAC market, and corporate executives have good reason to feel confident. Since deals can take 6-months to a year, a lot of the current activity will come to market later this year. We expect the second half of 2021 to be a strong M&A period. While the near-term outlook is strong, all good things come to an end eventually, and while there’s plenty of room left to run right now, in the long-term things will settle down. We don’t expect a crash by any means. The climate is strong, but cycles ebb and flow, and at some point, things will slow.

Marc Cooper

How has Covid-19 affected the M&A?

In the beginning, survival was the name of the game for a lot of companies. Yet, in the fall of 2020 we finally saw the M&A landscape start to shift with rumblings of activity here and there. That grew as Q4 took shape and momentum really started to build. Fast forward to today and there is such a clear and significant demand. It is busier than I have seen it in recent memory. While there still may be dark clouds on the horizon and we’re very cognizant of the long road to recovery that exists for many, we do expect the current M&A momentum to continue, as companies assess the marketplace and look for strategic ways to strengthen their position and grow. It’s a great time to be a banker.

How are you advising clients right now?

If the economy is in a good place, then we are in a good place. At PJ Solomon, we are advising clients to use the current moment to create moats around their business, tapping into cheap equity and debt to grow. It’s a good time to be opportunistic and we’re seeing clients across all of our verticals take advantage of the environment.

What is the number one thing businesses should be on the lookout for?

For companies, it is also a smart time to be thinking about M&A as a means of either consolidation, repositioning or growth creation. By capitalizing on a strong equity market, low interest rates and a reasonable regulatory environment, many businesses are in a position to succeed and use M&A as a tool for value creation.

Do you have your eye on any specific sectors?

As a firm, PJ Solomon is laser-focused on the following sectors consumer retail, financial sponsors, fintech, grocery, pharmacy and restaurants, healthcare, infrastructure, power and renewables, technology, media and telecommunications.

What about macro trends?

Digital transformation has been the cornerstone of our country for quite some time now. Yet, I think the pandemic has really put into perspective and signaled the true importance of digital innovation across all sectors. In the coming years, I think we will see more sectors working with technologies in ways we would have never thought or imagined. And it won’t just be in technology or consumer retail. Industries across the spectrum will be leveraging new technologies to operate more efficiently, which creates value for shareholders, employees and management. The benefits of this are almost too large to comprehend.