A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

London (CNN Business)Companies have spent most of 2020 racing to secure the cash they need to do business and shore up their balance sheets in the face of an unprecedented economic shock. Now, some are starting to look ahead and strategize about how they can stay competitive in a post-coronavirus world.

What it means: Conversations about potential mergers and acquisitions are picking up again, Hernan Cristerna, global co-head of JPMorgan’s M&A business, told me. That could lead to a wave of deals announced in the first half of 2021.

“In the past couple of months, a lot of the discussion with our clients has been focused on liquidity, access to funding — I think that is beginning to change,” Cristerna said.

Global M&A volume between March and May was down 42% compared to the same period last year, according to data from PitchBook.

The deals that come out of the coronavirus era will look different than the ones that preceded it. Companies may become increasingly focused on controlling more of their supply chains instead of just trying to capture more market share in existing lines of business.

But scale will also be increasingly important for many firms, especially as a means of keeping costs low at a time when consumers are expected to stay very price-conscious, Cristerna said.

“We did see a decrease in discretionary spending on the back of the financial crisis in 2008,” he said. And the coronavirus recession, Cristerna noted, is “much deeper.”

Conserving costs and scaling up could be particularly important for airlines, the hospitality sector and the energy industry, all of which have been hit hard by plunging demand due to the pandemic. Leaders expect the recovery to take years.

One wild card could be the regulatory environment, which Cristerna said the bank is now thinking about much earlier in the process of vetting and constructing deals.

In a world where nationalism is resurgent, he said, US companies could choose to focus mostly on other American firms. That may leave European or Japanese companies with fewer potential partners, cutting down on the number of cross-border deals.

PitchBook analyst Dylan Cox agreed that M&A activity is likely to “remain subdued” for the rest of 2020. He noted that the prospect of business disruptions tied to Covid-19 makes it difficult for buyers and sellers to agree on price.

That said, “cheap debt and equity financing means that certain acquirers will be more opportunistic,” he told me.

Investors are betting on bankruptcy stocks

The recent market rally has left plenty of strategists scratching their heads, lamenting the fact that asset prices are divorced from the grim reality playing out in the economy.

But no market trend has been quite as curious as the surge in bankruptcy stocks. Hertz, JCPenney (JCP), Pier 1 (PIRRQ), Whiting Petroleum (WLL) and Diamond Offshore (DO) have all enjoyed spectacular pops in the past few weeks, my CNN Business colleague Paul R. La Monica reports.

See here: A group of more than a dozen bankrupt firms’ stocks are up nearly 50%, on average, over the past two weeks, according to data from Investor’s Business Daily and S&P Global Market Intelligence.

Hertz (HTZ), trying to seize the moment, has even gotten approval from a bankruptcy judge to sell up to $1 billion in new stock, a highly unusual move.

Experts theorize that bankruptcy stocks have become easier to trade after a wave of online brokerage firms eliminated trading fees last year.

Data from Robintrack, a firm that follows holding patterns of traders using the popular investing app Robinhood, shows that both Hertz and Luckin Coffee — which fraudulently inflated sales and could be delisted from the Nasdaq — are among the top 10 stocks traded on Robinhood in the past month.

Retail investors have played a key role in the recent market rally, according to JJ Kinahan, chief market strategist at TD Ameritrade.

The online brokerage saw clients open up 608,000 new accounts last quarter, up 230% from the last three months of 2019, with the lockdown giving non-professional investors more time to learn market fundamentals.

Robintrack data shows that investors have snapped up shares in American Airlines (AAL) and Delta Air Lines (DAL). Warren Buffett, meanwhile, dumped these stocks last month, worried that the industry’s struggles would drag on.

“Retail investors thought things had gotten overdone,” Kinahan told me.

Up next

Monday: China unemployment, industrial production and retail sales data; Empire State manufacturing survey

Tuesday: Bank of Japan interest rate decision; Germany economic sentiment data; US retail sales and industrial production

Wednesday: OPEC monthly report; US housing starts and building permits

Thursday: EU leaders meeting; Bank of England interest rate decision; JD.com’s Hong Kong market debut; US initial and continuing jobless claims

Friday: Japan inflation data

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Ireland’s Donohoe named head of eurozone finance group

BRUSSELS — Ireland’s Paschal Donohoe was elected Thursday to head the finance group of the powerful bloc of 19 nations using Europe’s single currency, beating out challengers from Luxembourg and Spain. The announcement came in a tweet from incumbent Eurogroup…

Apple faces consumer protection probe by multiple U.S. states: Axios

(Reuters) – Multiple U.S. states are investigating Apple Inc (AAPL.O) for potentially deceiving consumers, online news site Axios reported on Thursday, citing a March document from a tech watchdog group. The Texas Attorney General may sue Apple for violating the…

McDonald’s facing bumpy recovery, 2Q sales down 30%

Business did improve for McDonald’s throughout the second quarter as restrictions lifted across the globe, but the fast food giant faces a bumpy — and expensive — recovery. Of the chain’s 39,000 restaurants worldwide, 96% are now open, compared with…

Exclusive: Stay off Zoom, Google Hangouts, Standard Chartered chief tells staff

SINGAPORE/NEW YORK (Reuters) – Standard Chartered Plc (STAN.L) is the first major global bank to tell employees not to use Zoom Video Communications Inc (ZM.O) during the coronavirus pandemic due to cybersecurity concerns, according to a memo seen by Reuters.…