Is there an effect of COVID-19 on mergers and acquisitions of companies implementing industry 4.0 through the use of IoTs in Saudi Arabia?

Abstract

The COVID-19 pandemic had a great effect not only on daily life but also caused a significant catalyst in the global transition to digitization. Although countries had various measures and lockdown procedures, working remotely became the new norm while at the same time the world was battling with the pandemic from a healthcare perspective. This caused significant growth in the technology and healthcare sectors leading to many mergers and acquisitions (M&As) within these sectors. The role of industrial policy across nations was variable and has been greatly dependent on the country’s priorities and market patterns. Simultaneously and even before the pandemic, the world’s transition into industry 4.0 showed a broad industrialization into smart technology which was only catalyzed by the pandemic itself. Because technology was such a focus during this time period, companies already transitioning into industry 4.0 through the use of IoTs in some sectors tremendously benefitted from the pandemic and this was evident in the frequency and size of the mergers and acquisitions occurring in this sector.

Methods

This qualitative research design is based on a grounded theory approach because the focus of the study is to understand what happened to mergers and acquisitions in Saudi Arabia and what changes occurred. The focus of the interviews is to get a better understanding of how firms were affected by COVID-19, how they saw the acquisition landscape going forward and how their approach to managing acquisitions has changed. Results Data was collected from 10 employees of M&A practitioners (including executives and consultants) different companies within Saudi Arabia and also outside Saudi Arabia for comparison purposes. Initially 13 codes were identified as the key elements that were clear drivers to M&A adoption, then grouped into 4 second order themes: Demand for technological advancement, regulator / regional research, increased digitalization from pandemic, and local and international environmental laws and regulations.

Conclusion

Based on the results of this study, it cannot be said whether COVID-19 has affected frequency and size of mergers and acquisitions for companies using IoT both in Saudi Arabia and globally. These changes in M&A trends seem to be dependent on the sector as tech and healthcare companies flourished dramatically while other sectors seemed to struggle. This shows that regardless of the resources Saudi Arabia has and its willingness to make such a strong reputation, the lack of cross-border M&As gives a strong indication that this may be due to a lack of industrial policies and focus on ESGs.