As the Coronavirus epidemic aka Chinese Virus (as per US President Donald Trump) is leading the world to a virtual economic slowdown, trade analysts say that it can make many companies retreat from their pre-determined merger and acquisition deals – irrespective of the industry and business they are flourishing in.
Traders and fund managers predict that the nosedive of UK’s pound against the US Dollar is said to abandon many of the deals in Britain and the same might be witnessed in the United States within a month or so.
“I have been in business from the past 25 years or so and the virus spread will surely affect the merger arbitrage reach,” said Roy Beren, the Managing Member of Westchester Capital Management- a company that has over $4.1 billion assets under investments.
Beren announced that shares of companies that are in acquisition or merger mode are often traded with small discounts, as pricing stability for such assets at this juncture is quite risky.
But due to instability of pound in the UK markets, investors might fear in putting all their investments in a fear of mid-deal collapse.
Behren expects that same will reflect in the US markets in a couple of months and an instance on this is already available with US popular jewelry brand Tiffany & Co announcing trading discount of 14% against $135 per share as the markets in France are seen plunging from the past two days.
Investors argue that the situation will remain grim until August or September of this year as the Covid-19 spread is expected to subside by then….hopefully!