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A summary of Covid-19’s severe impact on stock markets and macroeconomic key figures. Will German M&A deal flow fall off a cliff as well?

07 May 2020

BDO Corporate Finance / M&A Germany has compiled a compact picture of Covid-19’s consequences on selected equity markets and key macroeconomic indicators. While German M&A deal flow has kept up well in Q1 2020, Covid-19 is expected to lead to a significantly lower deal count going forward. However, BDO M&A experts take the stance that some sectors will be immune to Covid-19.

Equity markets are characterized by unprecedented volatility

Equity markets have been hit hard by Covid-19, and although markets have veered away from their 2020’s low levels, it is still uncertain if that move is the starting point for a sustainable recovery or just a temporary “bear market” rally.

As the adjacent table indicates, a comparable downturn from mid-February to mid/end of March 2020 for the DAX, Stoxx 50, S&P 500, and MSCI World Index of ca. 34% to 37% is observed.


Performance 2020

1-Jan to 19-Feb

19-Feb to 23-Mar

23-Mar to 4-May





Stoxx 50




S&P 500




MSCI World





The recent stock market recovery which started at the end of March 2020 shows a differentiated picture: S&P 500 and MSCI World outperformed the DAX and especially the Stoxx 50. Fair to mention that the MSCI World is overweighted towards US tech companies. Hence the recent market move is a consequence of the more “Corona-proof” tech businesses.

EUR F/X & interest rates in the light of March 2020 emergency rate cuts

The EUR has appreciated against the USD and the GBP until the beginning and mid of March 2020, respectively.


























After FED’s and BoE’s emergency rate cuts of 150bps and 65bps (the accumulated effect of the FED’s and the BoE’s two consecutive rate cut steps) the EUR-appreciation faded away. The key interest rate for the EURO-zone remains unchanged at 0,0% but the ECB initiated a bond purchasing program (“PEPP Pandemic Emergency Purchase Program”) worth EUR 750bn (at least until end of 2020) that keeps EUR denominated government and corporate bond rates at lowest levels. It remains to be seen if the PEPP will be impacted by the recent verdict of the German Federal High Court of Justice to classify past ECB bond purchase programs as partly unconstitutional.

Real GDP growth trends suggest a short-lived recession scenario for key economies

According to S&P Capital IQ consensus data, real GDP & CPI growth expectations display a “V-style” recovery for the EU, the US and Germany: A recession in 2020 (ECB expects the Euro-zone’s economy to shrink between 5% and 12%) is followed by a rebound in 2021 whereas 2022 looks like a “back to normal” growth path. The GDP trend is mirrored by CPI predictions. In other words, the post-Corona era will experience inflation rates in excess of recent years.

Please also refer to BDO M&A’s accompanying chart Economic overview in the light of Covid-19 which highlights Covid-19’s mark on the global economy in pictures

A brief outlook on the German M&A Market — BDO M&A detects some bright spots in gloomy Covid-19 times

Q1 2020 M&A data published by mergermarket show that the M&A transaction environment has contracted. Deal activity plunged to 206 deals in Q1 2020 (versus 246 in Q1 2019) representing a decrease of 16% and making Q1 2020 the weakest first quarter since 2015. A trend which BDO M&A deems to be only to a minor but increasing extent a result of Covid-19.

Undoubtedly, the Covid-19 impact will eat in the M&A deal statistics more significantly from Q2 2020 onwards. In order to put the Q1 2020 German M&A deal numbers in perspective, it is worth to mention that the German M&A deal count fell to a level of 105 deals in Q2 2009 during the Lehman crisis.  

However, some bright M&A spots remain which are expected to bolster the domestic M&A market: BDO M&A expects sectors such as software, MedTech and healthcare, consumer staples, and high value-added business services to keep up well in an increasingly challenging transaction environment.

Also, on the positive flip side, an increasing level of corporate spin-offs and disposals of non-core businesses and activities, as well as unresolved succession situations will demonstrate a positive impact on the M&A market.

Especially when entrepreneurs recognize that the time period until the next cycle peak (with more appealing valuation levels) is too long, “a bird in the hand is worth two in the bush” scenario comes into play.