M&A Likely to Remain Strong in 2022 as COVID-19 Looms over Business Plans

M&A Likely to Remain Strong in 2022 as COVID-19 Looms over Business Plans

December 23, 2021

ABI Bankruptcy Brief

M&A Likely to Remain Strong in 2022 as COVID-19 Looms over Business Plans​​​​​​

Mergers and acquisitions hit a record in 2021, fueled by low interest rates, a surge in private-equity fundraising and companies’ efforts to respond to broader shifts in their industries, the Wall Street Journal reported. The total value of global M&A transactions through Dec. 21 was $5.7 trillion, up 64% from the same period a year before, according to Refinitiv, a data provider. The total number of deals, meanwhile, rose 22% during that period, to 59,748, Refinitiv said. Many of the factors that propelled deal-making in 2021 are expected to continue into next year, M&A lawyers and advisers said. But policy changes on the horizon could dampen the pace of corporate tie-ups, including interest-rate increases from the Federal Reserve — which could increase companies’ financing costs — as well as increased scrutiny from antitrust regulators. It also remains to be seen whether new variants of COVID-19, such as Omicron, have an impact on corporate deal-making, advisers said. (Subscription required.)​​​​​​

Commentary: CFPB Takes Aim at ‘Buy Now, Pay Later’ Credit*​​​​​​

Layaway strategy, which had been largely retired, is having a resurgence with modern-day features, according to a Washington Post commentary. The current “buy now, pay later” (BNPL) transactions are done over apps rather than at a store’s customer service counter. And you get the product now, rather than having to wait to pay it off. The ease of the payment plans might be leading to more impulse purchases — not just during the holidays but all year — and that is making the Consumer Financial Protection Bureau (CFPB) uneasy. The CFPB recently ordered five companies offering “buy now, pay later” credit to answer some questions about their business practices. The CFPB has asked Affirm, Afterpay, Klarna, PayPal and Zip to collect information on the risks and benefits of the BNPL offerings. Among other issues, the CFPB is concerned about the level of debt consumers are racking up and what data is being collected. “Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists, where the consumer gets the product immediately but gets the debt immediately, too,” said CFPB Director Rohit Chopra. BNPL credit deals allow consumers to split the payments for the purchases, typically into four interest-free installments. Fees may kick in only if payments are made late. The BNPL credit products are popular among younger adults and lower-income consumers, and usage of the payment plans has spiked during the pandemic. Twenty percent of Americans said they had used a BNPL payment plan in the previous 12 months, according to a poll over the summer by SurveyMonkey. More than half of those making less than $50,000 a year said that they are interested in using the service because they would not have been able to afford their purchases otherwise, the SurveyMonkey poll found.

* The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

November Consumer Prices Up 5.7 Percent over Past Year, Fastest in 39 Years​​​​​​

U.S. consumer prices rose 5.7 percent over the past year, the fastest pace in 39 years, as a surge in inflation confronts Americans with the holiday shopping season underway, the Associated Press reported. The November increase, reported Thursday by the Commerce Department, followed a 5.1 percent rise for the 12 months ending in October, continuing a string of annual price gains that have run well above the 2 percent inflation target set by the Federal Reserve. Consumer spending, which accounts for 70 percent of U.S. economic activity, rose 0.6 percent in November, a solid gain but below the 1.4 percent surge in October. Personal incomes, which provide the fuel for future spending increases, rose 0.4 percent in November, slightly lower than the 0.5 percent increase in October. Both gains came after a 1 percent plunge in incomes in September, the month that government benefit programs such as expanded unemployment benefits came to an end.

Small Businesses Struck by Omicron Face Hard Choices Before Holiday​​​​​​

After nearly two years of dealing with worker shortages, pandemic restrictions and rising prices, many small businesses are suddenly facing a surge of employee illnesses from the Omicron variant that is leading to some hard choices, the Wall Street Journal reported. Steingold’s of Chicago, a deli in the city’s Lakeview neighborhood, had weathered the pandemic without a single case of COVID-19 until last week, when one in 10 employees tested positive. Co-owner Aaron Steingold followed with a positive result a few days later. Steingold decided to close the shop, which is known for its bagels, lox and corned beef, on Saturday and reopened Wednesday, after the remaining staffers tested negative on both rapid and PCR tests. He and the other staffer who tested positive will continue to isolate, and the shop for now will be taking orders with no indoor dining, he said. Everyone on the staff is fully vaccinated and boosted, he said, but that doesn’t seem to matter with this strain of the virus. As the Omicron variant has led to another surge of infections around the country, some cities are beginning to crank up restrictions. On Tuesday, Chicago Mayor Lori Lightfoot said that starting Jan. 3, Chicagoans will have to show proof of vaccination to enter restaurants, bars, gyms and entertainment venues that serve food or drink. Boston and Philadelphia have announced similar plans. For small-business owners, the current surge of the virus is coming at what feels like the worst possible time. They endured previous shutdowns, and a tight labor market has made it harder to return to capacity once they reopened. Supply-chain disruptions have also hurt business. (Subscription required.)

U.S. Jobless Claims Unchanged at 205,000​​​​​​

Jobless claims remained at 205,000 as the four-week average, which smooths out week-to-week ups and downs, rose to just over 206,000, the Associated Press reported. The numbers suggest that the spread of the omicron variant did not immediately trigger a wave of layoffs. Altogether, 1.9 million Americans were collecting traditional unemployment aid the week that ended Dec. 11. The weekly claims numbers, a proxy for layoffs, have fallen steadily throughout most of the year. Employers are reluctant to let workers go at a time when it’s so tough to find replacements. The U.S. had a near-record 11 million job openings in October, and 4.2 million Americans quit their jobs — just off September’s record 4.4 million — because there are so many opportunities.

Volunteer Today to Become a Grader or Judge for the Duberstein National Bankruptcy Moot Court Competition!
The Duberstein National Bankruptcy Moot Court Competition will be held in New York Feb. 26-28. The Duberstein Competition, now in its 30th year, is a result of a longstanding partnership between the American Bankruptcy Institute and St. John’s University School of Law. It is widely recognized as one of the nation’s preeminent moot court competitions. After moving to a virtual platform in 2021 due to the COVID-19 pandemic, the Duberstein Competition will return to being an in-person competition in 2022. Forty-six teams from law schools across the country will compete through written briefings and oral arguments. This year’s problem, which was once again developed by Hon. John T. Gregg (U.S. Bankruptcy Court W.D. Mich.; Grand Rapids, Mich.) and Paul R. Hage (Jaffe Raitt Heuer & Weiss; Southfield, Mich.), presents two hotly contested issues for argument: (1) whether a seller of goods is entitled to reduce its preference exposure pursuant to 11 U.S.C. § 547(c)(4) by the value of goods sold, even though the debtor in possession paid for such goods in full pursuant to 11 U.S.C. § 503(b)(9); and (2) whether a trustee must timely perform the obligations of a debtor under 11 U.S.C. § 365(d)(3) by paying rent due prior to the rejection of an unexpired nonresidential real property lease but allocable to the period after the effective date of rejection.

The competition fact pattern is available here.

The Duberstein Competition is looking for volunteer brief-graders and judges for the preliminary rounds on Saturday, Feb. 26, and Sunday, Feb. 27. To volunteer to serve as a brief-grader, please register here. To volunteer to serve as a preliminary-round judge, please register here. For inquiries regarding serving as a brief-grader or a preliminary-round judge, please contact Paul R. Hage.

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New on ABI’s Bankruptcy Blog Exchange: Regulators Must Root Out Bias in AI-Based Lending

A recent decision reminds creditors of the harsh consequences of failing to comply with a court-imposed deadline for filing claims in a bankruptcy case, according to a recent blog post.

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