PJ Solomon CEO Sees M&A ‘Closed Down’ With Lawsuits Resulting

PJ Solomon Chief Executive Officer Marc Cooper said he sees mergers and acquisitions falling apart amid the financial tumult caused by the coronavirus pandemic, and that lawsuits will rise as buyers try to get out of existing deals.

“Most transactions that are not in contract are either going to be renegotiated or shelved,” Cooper said Wednesday in a Bloomberg Television interview, adding that firmer deals that are canceled will probably result in litigation. “There are very few contracts that actually have provisions that give you outs for a pandemic.”

Some deals have already died. Xerox Holdings Corp. ended a hostile bid for HP Inc. on Tuesday amid uncertainties stemming from the Covid-19 crisis. The volume of deals through March marks the slowest quarter since the first three months of 2014, according to data compiled by Bloomberg. Cooper said there’s going to be “demand destruction” when it comes to discretionary spending as people sit on the sidelines.

“M&A is pretty much closed down for the time being,” said Cooper, whose investment bank is a unit of Natixis SA. “This will be a fairly widespread swath of pain going through the economy.”

WATCH: Marc Cooper, PJ Solomon chief executive officer, says the coronavirus outbreak has brought M&A activity to a halt.

Daybreak: Americas.” (Source: Bloomberg)

Read more: Virus outbreak could lead companies to renegotiate M&A deals

Yet, like his peers, Cooper expects a pickup in restructuring. Investment bankers have turned their attention to client liquidity needs, expecting bankruptcies to surge. Irwin Gold, executive chairman of Houlihan Lokey Inc., said Tuesday that the situation is worse than the 2008 recession.

Read more: Houlihan Lokey expects default surge in a crisis worse than 2008

At the same time, private equity and credit investors have been sitting on the sidelines waiting to invest in troubled companies that are set for a rebound once the pains of the coronavirus begin to subside. Cooper said he believes financing from private credit investors may be less attractive because publicly traded debt has become so cheap.

“It will be expensive,” Cooper said. “The problem we have with private credit folks is they have pretty wide mandates.”

Read more: Dealmakers getting creative after virus upends M&A market

--With assistance from Alix Steel.

To contact the reporter on this story:
Sonali Basak in New York at sbasak7@bloomberg.net

To contact the editors responsible for this story:
Michael J. Moore at mmoore55@bloomberg.net

Daniel Taub, Steve Dickson

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