ArkMalibu Weekly Update: Assessing the Impact of COVID-19

Below are our weekly summary thoughts on the M&A market, the economic outlook, and reasons to be optimistic.

Reasons for Optimism in M&A and Capital Markets

  • 98 deals closed in the U.S. & Canada over the past 7 days (last week 123 deals closed)
  • Unsolicited calls from potential buyers remain steady
    • Buyers have money and expect vast reward and upside from buying in an “off” market, yet, it is only an “off” market if the seller allows it to be
  • Shares of economically sensitive companies power the latest stock market rebound, as industrial and energy sectors log the biggest gains in the S&P 500
    • S&P 500 crosses 3,000 for the first time since March 5th (now 10.5% below all-time high)
  • U.S. corporate bonds wrapped up their best week in more than a month, reflecting investors’ hopes for an economic rebound and support from the Federal Reserve
    • U.S. companies have issued a record $1.2 trillion worth of bonds this year, a 78% increase relative to the comparable period of 2019

Good News We’ve Been Reading

Economic Recovery Beginning Across Globe

  • United States: all 50 states continue to progress in reopening stages
    • U.S. new business/mortgage applications and petroleum demand rise at a rapid pace vs. March lows
    • U.S. lawmakers in discussions to revise small-business aid program, as needs shift from covering paychecks during shutdown to paying employees as reopening begins
    • In post-crisis operations, 70% of CFOs expect core businesses to be more digitized and automated, and 40% expect their supply chains to be more diversified
    • Entertainment update
      • Memorial Day weekend saw massive crowds at beaches, boardwalks, and other summer attractions, particularly in Florida, New Jersey, and Washington D.C.
      • New York’s phase of reopening businesses in June will return up to 400,000 people to work
      • Sea World, Lego Land, and U.S.S. Midway Museum in San Diego seek permission to reopen July 1st
      • Florida’s Disney World Theme Park opens July 15th
    • Momentum surges behind the comeback of American sports, as more progress has been made in the last 10 days than the previous 10 weeks
      • NBA looking to restart in late July, relocating the whole league inside a Walt Disney complex in Orlando
      • MLB owners & players’ union in discussions to start the baseball season
      • NHL players approve plans for expanded playoff
    • Europe: inter-EU borders continue to open, plans for international tourism underway
      • Austria: opened crossings into Hungary May 13th, will open remaining inter-EU borders June 15th
      • Italy: citizens of EU countries will be allowed to travel to Italy starting June 3rd; foreign minister Di Maio calls for joint re-launch of European tourism mid-June
      • Portugal: beaches & hotels will be ready to welcome tourists mid-June
      • France: plans opening of high schools, amusement parks, and movie theaters for July
      • Spain: plans to gradually open to international tourists and lift quarantine in July
    • Japan lifts State of Emergency in Tokyo & four remaining areas after number of infections falls across the country; considerations for $930B stimulus also in the works
    • Cambodia is now open to travelers from all countries
    • Africa’s Tanzania & Zambia borders are open as well

Vaccine Development Update

  • To date 150 vaccines are in development, 10 of which are in human trials, with 350+ drugs in the works / being studied
  • Novavax starts Phase 1 trials after $388mm support from the Coalition for Epidemic Preparedness and Innovation, backed by Bill Gates
  • CanSino Biologics’ vaccine shows promising results in preliminary human study, appearing safe for use and producing immune response in most of the study participants
    • Follows preliminary report that Moderna’s vaccine also induced an immune response and was generally safe and well-tolerated
  • Merck buys privately held Austrian company and begins work on two potential vaccines

Updates in COVID-19 Testing

  • Largest research effort to date on blood-plasma transfusions, run by Medrxiv, suggests transfusions from recovered patients may improve survival rates in patients with COVID-19
  • All states have now met the threshold of testing at least 2% of their population in order to begin reopening as laid out in White House guidelines, with many states rising above 4%
    • Follows dramatic decline in deaths and hospitalizations across the country, especially the New York City metro area
    • ICU bed utilization rates in NY and NJ have finally fallen below 75%
    • Fairground sites in Detroit offer free testing to all residents
    • Rady Children’s Hospital in San Diego plans to test up to 2,000 children & their families per day
    • CVS plans to establish 1,000 testing locations across the U.S. by end of June

Innovations Bloom, Habits Change as Society Adjusts to COVID-19

  • Colombian delivery app Rappi tests robots for contactless delivery
  • Bolivian digital collaboration platform CuentasTu links hospitals and donors
  • U.S. based floor covering manufacturer Milliken launches carpet tiles to aid in social distancing
  • Aldi introduces automated traffic light system across UK stores to ensure social distancing

ArkMalibu is happy to answer any questions you may have and to offer guidance during this challenging time. Please visit our website (https://www.arkmalibu.com) for more information.

Until our next update, we send best wishes to you and yours for safety and health.

Stay informed with ArkMalibu and receive periodic news, reports, and invitations.