2020 brought some hardels to deal-making. Early on, the pandemic made the notion of corporate takeovers seem, for a few months, like something from a lost era. But then came a burst of activity like few had ever seen before, even as the health crisis raged. In 2020, SPACs become highly important in mergers and acquisitions.
Nearly 45,000 deals worth $3.4 trillion had been announced this year, down 8 percent by number and 7 percent by value from the same point a year ago, according to Refinitiv.
Intuit – Credit Karma
Fintech giant, Intuit (INTU) announced that it would be acquiring Credit Karma for approximately $7.1 billion, making it Intuit’s largest acquisition ever. Intuit is a global financial platform company with TurboTax, QuickBooks, and Mint as its flagship products.
Grubhub – Just Eat Takeaway
In June, Just Eat Takeaway entered into an agreement to acquire Grubhub (GRUB) for $7.3 billion. The move marks Just Eat Takeaway’s foray into online food delivery in the U.S. with the two companies together creating the world’s largest online food delivery company outside of China. Grubhub is a leading online and mobile food-ordering and delivery marketplace in the U.S., with nearly 300,000 restaurants across 4,000 U.S. cities.
Uber – Postmates
In July, Uber (UBER) entered into $2.65 billion deal to acquire Postmates. This comes after Uber’s $6.5 billion bid for Grubhub fell through. Postmates is complementary to Uber Eats, with differentiated geographic focus areas and customer demographics.
Visa – Plaid
Visa (V) announced the decision of Plaid’s acquisition for $5.3 billion in January 2020. Connectivity between financial institutions and developers has become increasingly important with the growing demand to facilitate consumers’ ability to use fintech applications.
Morgan Stanley – E*TRADE
The acquisition announcement of E*TRADE (ETFC) for approximately $13 billion by Morgan Stanley (MS) in February 2020 has been one of the biggest acquisitions of 2020. The decision is expected to boost Morgan Stanley’s position across all channels and segments in the wealth management business.
Overall activity in the M&A space remained subdued amid the pandemic. During 1H 2020, 24,698 deals were announced globally, marking a 15.1% decline from 1H 2019. The drop is sharper in terms of deal value, which witnessed a fall by 44.7% from $1.85 trillion in 1H 2019 to $1.02 trillion in 1H 2020, according to a report by GlobalData.
As we look towards the future, megatrends such as the transition to the circular economy and the zero-waste movement promise to shape the sustainable workplaces of tomorrow. The disruptions of the early 2020s have already begun to catalyze profound changes in our daily lives. Not only do people want to see action on sustainability, but employees are also demanding that their companies change so that they are aligned with their values.
If you’re starting sustainability in the workplace program from ground zero, you’ll need to justify your time and resources. Sustainability in the workplace can include the environment, economic or health and community sustainability. However, companies often categorize sustainability into three pillars: Environment, Social, and Economic.
There are many reasons why you should invest in sustainability. First of all, energy-efficient workspaces are typically cheaper to operate, so there’s a potential for savings on utilities and maintenance. It will also help the environment and, your employees will benefit from healthier and safer working conditions. Lastly, having a sustainable workplace prove a company’s commitment to sustainability, which can be a powerful branding and marketing tool.
According to Unily 2020 Census, designed to uncover how employees feel about sustainability in the workplace, the following data arrived. The results underscored the need for change, with 83% of respondents believing that their company isn’t doing enough to tackle sustainability issues.
How can your company bring sustainability to the workplace?
You don’t have to search too hard to find a company flexing its green credentials. There are startups like co-working company Upflex, which plants a tree for every booking it receives.
A company’s carbon footprint includes its employees’ emissions from commuting. During a pandemic, many companies were forced to work from due to safety measures. However, that can be something your company can do in the future. Employees should be allowed to work from home on green days and set up interoffice meetings using videoconferencing.
Your business is part of various supply chains that should be audited for environmental impact. Engage with cafeteria food-service vendors that offer compostable packaging and plenty of meat-free options.
The need for increased hygiene means, unfortunately, the need for more disposables and more individual packaging, and in the workplace, this has manifested particularly at mealtimes. Food delivery or takeaway options help to keep employees safe as that they do not have to risk leaving the office to eat, but the amount of single-use food packaging has skyrocketed as a result. For a start, companies with larger offices can consider catering services rather than allowing employees to expense on-demand food delivery.
The aim of a post-COVID world has to be to bring order to the chaos and take away the headache from businesses that are faced with the challenge of a rapid and unplanned shift to remote working.
Moreover, emphasis should be on the refurbishment and reuse of IT equipment to reduce the e-waste by adopting sustainable technology lifecycle management.
“We must emerge from this health and economic crisis with a newfound pace and ambition for addressing the climate emergency,” said Patrick Flynn, Vice President at Salesforce.
That said, COVID-19 presents an additional incentive for companies to consider the sustainability of their workplace and look for improvements that will benefit the company and their employees.
What will 2021 bring for sustainable investing? More companies will feel pressure for ESG disclosures from investors, regulators and employees. Moreover, Millennials will continue looking for sustainable companies and supporting their agenda. Millennials consistently show a tendency to crave social responsibility, whether it’s in the products they purchase, the organizations they work for, or their investment portfolios. In 2021 be sure to prepare for any ESG requests, as the new regulations have become mandatory in some countries.
Did you know that Task Force on Climate-related Financial Disclosures (TCFD) reporting became mandatory for UN PRI signatories in 2020 and is set to become required over the next few years in the U.K., New Zealand and perhaps even the U.S.? European Union’s Sustainable Finance Disclosure Regulation (SFDR), if finalized in its current form, will require investment institutions holding your shares to report on whether your company operates in or around areas of high biodiversity value.
If you haven’t already, you will be hearing from investors about the many disclosures you are missing. Those could include carbon emissions or revenues from EU Taxonomy green activities.
Furthermore, we at VentureXchange as financial advisors are here to help your company with ESG reporting and sustainability strategy. Nevertheless, your company action is important but there are limits to what individual firms can do to address the underlying root causes of non-sustainability.
Social, Sustainability and Green Bond Issuances 2015-2020 (USD)
Two social bonds issued this year by Bank of America provide a good illustration of the range of purposes these issuances aim to serve. One intended to provide financing to the healthcare industry, while the other aimed at reducing racial inequality through a comprehensive program of lending to underserved groups.
Pfizer, too, issued a social bond for healthcare purposes, but its use of proceeds explicitly includes vaccine production in low and middle-income countries. Addressing global health emergencies and helping fund the development of its COVID-19 vaccine. A key challenge for investors lies in the tension between a desire for certainty that an investment will have the desired social outcome and the need to try new things in the time before definitions and assessment criteria developed.
In 2021 sustainable investing, will stay in the focus for many investors and companies. However, the lack of standards in a fast-growing area means that a few bumps in the road are inevitable. But the lessons learned by companies and investors willing to forge ahead could lay the foundations for others as they innovate scalable investable solutions.
According to Investopedia, a growing number of investors are placing billions of dollars into socially responsible impact investing funds, which are also known as Environmental, Social, and Governance (ESG) funds. These portfolios select stocks based on a company’s ESG practices, along with more traditional financial measures. Sustainable investing in 2021 is focused to maintain sensitivity to environmental, social, and governance (ESG) factors. Take a look at the top of the best bond ETFs that emphasize social responsibility.
Sustainable investing – long term thinking
The sustainability mindset is something most investors already have on an individual basis. With sustainable investing you are thinking long term – about your education, your children’s education and things that are 10, 20 years off. With sustainable investing, you’re thinking about your hopes for the next generation. Sustainable funds are seeing a surge in assets, and some of the world’s largest asset managers see growing opportunities in sustainable investing.
Morningstar reported that 23 new sustainable funds were launched in the first half of 2020 with more to come. In a year like 2020, risk management is essential and sustainable investing has long been used as a risk-management tool.
Talk with your advisor about how he or she manages sustainable portfolios and how you might add sustainable investing to your portfolio. If you’re looking for an advisor to help you with sustainable investing and ESG regulations, contact our advisory team at VentureXchange.
As countries re-opened their economies, in Q3’20 both VC investors and companies have adapted to new ways of doing business. In Europe, sectors have seen high potential despite or because of COVID-19 attracted significant investors’ attention, including transportation and logistics, health and biotech, and fintech. Most VCs have adapted to new, remote ways of doing business, and capital invested continued at a strong pace in the third quarter.
A new report from Pitchbook highlighted the venture capital investment situation in Q’3 20. The $37.8 billion invested in Q3 was relatively on par with Q3 2019, thanks largely to late-stage investments. The startup ecosystem appears to be responding admirably to the grave challenges currently facing the US. Startups and entrepreneurs look to be moving aggressively to address the major challenges of our time: climate change, healthcare, COVID-19, and more.
There is a rise in sustainable startups in CEE – changing the world towards sustainability. The CEE region continues to evolve and compete to be at the forefront of the European tech startup scene. Startups are crucial elements of fostering knowledge-intensive and sustainable growth. While some sectors have struggled during the pandemic, the adoption of many new startup technologies accelerated and underpinned investment in those spaces
Among the top sustainable companies in Europe, first on the list is Denmark’s Ørsted A/S. The company claims the top of the leaderboard in 2020. Within a decade, the company has completely transformed its business model—shifting away from the Danish Oil and Natural Gas (DONG) company into a pure-play renewable energy company.
Moving forward, we may see significant long-term changes in consumer and business behaviour that prove fundamental to the creation of new, large firms that emerge from this turbulent time.
However, not all trends in the ecosystem have been positive. The number of seed and early-stage VC investments has rapidly declined, and we have seen an even steeper reduction in the number of first financings for startups, which reached a 10-year low in Q3. Ecosystem concerns also include worries over a retraction on gender-diversity progress given decreased investment into female-founded startups in Q3, and in 2020 overall. We’ve seen the number of women in venture capital firms with two or more female partners doubled last year to 14%.
Trends to watch for in Europe
As Europe continues to adjust to a new reality, VC investors in Europe are expected to remain highly focused on areas such as health and biotech, fintech, and the future of work. In fact, 2020 is the largest funding year ever for digital health. The $4.0B invested in US-based digital health startups through Q3 brings the year’s running total to $9.4B. Notably, 19 of the 25 largest early-stage VC deals in Q3 were in healthcare.
Pharma and biotech startups also accounted for four out of the five largest exits in the third quarter of the year, representing a combined value of €5.3bn. That’s on track to beat the annual exit values from software startups for the second consecutive year, according to the report from Pitchbook.
GDP levels in the euro area and EU
The COVID-19 pandemic also had a strong impact on GDP levels. Based on seasonally adjusted figures, GDP volumes were significantly lower than the highest levels of the fourth quarter of 2019, according to data from the EU Commission.
The number of employed persons decreased by 2.9% in the euro area and by 2.7% in the EU in the second a quarter of 2020, compared with the previous quarter.
These were the sharpest declines observed since the time series started in 1995. In the first quarter of 2020, employment had decreased by 0.3% in the euro area and by 0.2% in the EU.
Venture Capital Investment Q3
Global venture capital investment continued to be very strong in Q3’20, opposing concerns of a potential drop-off in investment due to the challenges associated with getting deals completed during a pandemic. While the number of VC deals dropped for a sixth straight quarter, the level of investment remained high, as VC investors continued to focus on late-stage companies. Three $1 billion+ mega-deals helped to propel the global investment total in Q3’20, including raises by WM Motor in China, SpaceX in the US, and Flipkart in India. The US accounted for the largest amount of VC investment globally during Q3’20 at $37.8 billion raised, although both Asia and Europe also saw increases compared to the previous quarter.
Following a record high in Q2’20, Europe continued to see robust VC investment this quarter. Fintech and health tech were among the hottest areas of investment this quarter. Venture capital investment is expected to remain steady in Q4’20, although the US presidential election and the possibility of a hard Brexit on December 31, 2020, could cause some investor concern. COVID-19 is expected to remain a key driver of both investor caution and investment heading into Q4’20. Therefore, it is safe to say, that investors will keep their focus on health care and fintech as key areas of investment, in addition to B2B solutions and edtech.