Despite a cloud of uncertainty surrounding global markets in 2020, one thing has become very clear during the Covid-19 pandemic: Merging two companies is like combining oil and water.

The two do not often mix, unless, of course, certain conditions are met. But even when those conditions are met, it is a delicate bond that can be ripped apart for more quickly and easily than it was put together.

On June 8, software and e-commerce company Ebix Inc. (EBIX) said it may countersue Indian online travel company Yatra Online Inc. (YTRA), which called off a $239 million takeover by Ebix days earlier and filed suit in the Delaware Court of Chancery, for the buyer’s “breaches of its representations, warranties and covenants” related to their agreement.

Concert ticketing services provider Live Nation Entertainment Inc. (LYV) on May 26 invoked the material adverse affects clause in terminating its $462 million purchase of a 51% stake in concert promoter and TicketMaster Mexico owner Ocesa Entretenimiento SA de CV.

In mid-May, automated security control services provider Forescout Technologies Inc. (FSCT) announced its $1.9 billion sale to private equity firm Advent International Corp. had been axed. Advent was not willing to push forward to close, and Delaware suits filed by Forescout have so far not changed its mind.

The list of deal agreements called off in 2020 while the ink was still drying goes on. Since January, when Covid-19 cases began popping up outside of China and the pandemic started to shake long-climbing global markets, 25 transactions worth about $30 billion have been called off, according to The Deal’s database.

Meanwhile, many more deals that have not yet been scrapped have been revised in hopes of pushing the parties past the current crisis.

Automotive parts supplier Delphi Technologies plc (DLPH) on May 6 agreed to a 5% price cut on its $3.3 billion sale to competitor BorgWarner Inc. (BWA) after the pair days earlier cautiously confirmed their commitment to the deal. The trim followed a brief public debate over whether BorgWarner had the the right to walk away from the transaction.

In late April, BP plc (BP) said it was committed to completing the sale of its Alaska oil and gas business to Hilcorp Energy Co. subsidiary Hilcorp Alaska LLC, but it had agreed to revise the deal to make it easier for Hilcorp to pay the full $5.6 billion purchase price over time.

And yet another lengthy list drawing attention consists of auction processes launched in late 2019 or early 2020 that were halted by government reactions to Covid-19.

Brookfield Asset Management Inc. (BAM) on March 11 shelved an auction of Australia’s Dalrymple Bay Coal Terminal, claiming that travel restrictions put in place to curb the spread of the novel coronavirus curtailed its ability to market the asset.

And London-listed passenger airplane leasing business Avation plc on May 27 terminated a lengthy strategic review without a sale two months after it said its auction process was being delayed due to “the market dislocation resulting from the Covid-19 pandemic.”

While these situations do not yet prove that 2020 will blow 2019 out of the water when it comes to the volume of withdrawn deals, this set of delayed, revised and reversed deals is intimidating for reasons beyond its size. Perhaps the most troubling theme is that a resounding majority of the parties have cited the Covid-19 pandemic in one way or another when placing blame for backing away or hitting the pause button.

But according to some of the top U.S. deal advisers and strategic corporate development officials, this story is not all gloom and doom.

There may yet be a silver lining to this crisis, according to members of The Deal’s recent webinar, Assessing Strategic Dealmaking in a Volatile Covid-19 Market, made in partnership with Cooley LLP, particularly in the technology, media and telecommunications, or TMT, sector, where some dealmaking has occurred despite, or perhaps partly because, the crisis.

“What I think is very interesting, is that like the 2008-2009 crisis, the volume of M&A activity is off 85%,” Goldman, Sachs & Co. head of TMT M&A Sam Britton said during the webinar. “I think that reflects companies decision when the Covid crisis hit in the third week of February, to first focus on how to operate remotely, how to keep their teams motivated and how to do so virtually, then turning their attention is to ensuring they have liquidity and financing. And in that world, M&A is just not a priority, has not been a priority.”

To be sure, some deals have made it across the finish line, particularly in healthcare and TMT. On April 8, online personal finance company Social Finance Inc. paid $1.2 billion for venture capital-backed fintech company Galileo Financial Technologies Inc., while private equity firm Veritas Capital Fund Management LLC on March 10 purchased DXC Technology Co.’s (DXC) state and local health IT services business for $5 billion.

Between Feb. 15 and May 15 — arguably the most quiet period for deals during the crisis — a total of 10 transactions worth at least $1 billion were announced, according to The Deal’s database, all of which were within the technology, telecommunications or healthcare industries.

Still, many more deals have been put on hold during the crisis, even in TMT, Britton admitted. And what’s kept dealmakers focused so squarely on the deals not getting done is the question of whether there will be a long-term implication for their day-to-day, and the market’s condition.

“A lot of live deals got set on hold at the outset, and the question for all of us in the trenches was, ‘Does hold mean that they are going to die or will they come back?'” Britton said. “So in a period of uncertainty in past corrections, including 2008 — I think this is the fifth [correction] in my 25 years of doing this — there’s been a familiar pattern, and that is after a correction it has taken on average six months for deal activity to start again in sort of baby steps. And then two years to get back to the levels that you were seeing before the crisis. This time around, the return has been faster. We’re already seeing a return to activity.”

Witness European online food delivery platform operator Just Eat Takeaway.com NV’s $7.3 billion purchase of U.S. peer GrubHub Inc. (GRUB) announced June 10.

“You saw some deals announced last week, kind of mid- to large size,” Britton added. “So it’s about three months faster, maybe twice as fast in terms of the first green shoots, or actually getting to deals announced. How long the recovery lasts, how durable it is remains to be seen. But that’s been the primary difference from history.”

Biggest Challenge Is Building Management Rapport

Given how much time is often spent on culture and employee integration during a deal process and in the months following an announcement, it might seem that these issues would be one of the greatest hurdles for putting a deal together in this environment. After all, how can you successfully integrate two companies whose management teams and employees have not met in person, and may not do so for the bulk of 2020?

It has not been integration or culture that has been the biggest challenge, however, according to Uber Technologies Inc. (UBER) head of corporate development and capital markets Jennifer Jarrett.

In her tech-savvy industry, where companies have revolutionized the way consumers interact with product and services providers by replacing tedious face-to-face conversations with quick and simple mobile applications, doing away with lengthy, monotonous interviews and other outdated traditions involved in navigating culture and integration may be an improvement.

“Interestingly, so far, we really haven’t seen much of a difference in terms of how we interview and assess employees and how we would integrate them,” Jarrett explained. “If anything it’s almost more efficient today, just to be able to do a lot by looking at LinkedIn profiles, doing Zoom interviews. Actually things can happen a lot more quickly just by using online tools.”

Instead, it is developing a relationship between management teams that has been the struggle.

“I think what we have seen probably the most noticeable difference, in terms of trying to get deals done in today’s environment and doing things from home, is more in the early stages of the process,” Jarrett said. “At that management presentation phase where it’s just harder to develop the same rapport and the same connection that you would get if you have two management teams in a conference room at the same time. Then you can have like a product person kind of interacting, and developing comes from another product person, and the same for the tech person.”

This interactive component is what Jarrett said she feels is lost most in Zoom meetings where there are 20 or more faces on the screen and one can become confused whether the person is speaking is from their organization or another.

“So that to me has been the hardest part of work from home, but there’s definitely pieces of it, like integration, where it has actually made me more efficient.”

Nevertheless, it appears at least some are successfully navigating these uncharted waters. Goldman’s Britton agreed there have been some new efficiencies born from the Covid-19 pandemic when it comes to putting deals together.

“There are certain parts of getting deals done that are anachronistic, and I think every one of us has said, ‘Why do we do it this way? Why do we have, you know, five different buyers come to four different hotels?’ So they won’t run into each other in the hall for a management presentation in Boise where everyone has to fly in and out?” he opined. “Just incredibly inefficient processes that everyone takes for granted because we’ve done it that way for 30 years.

“Covid, and everything we’ve done [in response], has just allowed people to be innovative in a way that no one would have sort of taken the risk around before in more normal flooding. I’m working on a relatively large deal that’s had 90 different meetings, and the buyer and the seller have never met one another in person. And I’m not sure they will before the deal gets signed.”

Goldman has streamed recorded management presentations and provided site tours to prospective buyers using drone footage.

“Some of these things are long overdue and it’s been sort of ‘necessity is the mother of invention,'” Britton added. “I think we’ve seen that, and I think a lot of those innovations will persist after after we get back on my normal foot.”

Face-to-face meetings are still incredibly important for relationship building, implying that dealmaking during Covid-19 will never live up to the tried-and-true method that came before, Jarrett warned.

“You’re not in a meeting, where you’re able to see body language,” Jarrett argued. “You just don’t get certain things on a Zoom with a bunch of little tiny screens that you would get when you’re in a room with someone.To me, that’s been the biggest missing piece.”

A balance of pre- and post-Covid tactics could breed a much more efficient process for dealmakers in the future, though.

“But I totally have to say there’s a lot of new efficiencies,” she added. “We are having probably more conversations with different companies than we’ve ever had because we could just hop from Zoom to Zoom versus, ‘Oh, I’m gonna drive down to the peninsula and lose four hours doing one in-person meeting or fly to the East Coast and lose a whole day.’ So there’s definitely been a huge pickup in efficiency there.”

What to Expect in the Second Half

While the first half of 2020 may be the worst period of dealmaking many have ever seen, there is hope to be found in business goals for the second half of the year.

“I’m trying to remember to say thank you to all of our teammates, internal and external, as often as I can because I think folks have done a remarkable job dealing with each other as people and making sure that our teams are healthy and strong … and I’m just amazed at the quality of work that we’re doing through all of this,” Cooley partner Jamie Leigh said. “I’m also telling people to get ready because I see a lot of smart people thinking about how to make the next 12 to 18 months really strong from a business perspective.”

Leigh said part of her focus right now is directed toward companies that need to make some harder decisions about whether or not the time is right to sell or if they should push out those decisions a little further.

“People are definitely ready to get into the boardroom and start making serious decisions,” she said. “So we’re going to see a lot of deal activity in our sector over the next six months. And we need to be super on top of it as advisers because the issues are just more interesting for some companies and more difficult. I would say every deal I’m doing now is a little messier, a little harder, a little more intense, a little more adviser-centric.

Companies in the technology sector, with deep roots in the unpolished and often-eccentric style of Silicon Valley, often like to be “adviser light,” Leigh joked.

“One of the changes that I’ve really seen over this recent period is that the reach out to bankers and lawyers has been earlier and more team-oriented,” she explained. “I think we’re helping with strategy and execution in a very different way, which for those of us on the advisers side is very fun. But we’re certainly in boardrooms and executive meetings with a little more frequency and a certainly earlier.”

Goldman’s Britton agreed, noting that’s he seen an uptick in conversations about second-half decisions, but they have come with varying degrees of caution and optimism.

“It’s a fascinating time because with at a given client or on a given board, you can have really different views about what the next six months will hold,” he explained. “Some are saying, ‘Well, listen, we need to really focus on liquidity because there could be another leg down after stimulus sort of runs through,’ while others are saying that the markets are as healthy as they’ve ever been. I’m trying to navigate different perspectives, and it’s as interesting intellectually as it has been in a long time.”

Because beyond Covid-19, there are other layers of complexity working their way into markets.

“We are also seeing things like the IPO reopen, and when the IPO has come to market, that is a logical moment for people to check strategic interest,” Britton added. “So there are a few sort of technical things or realities of the M&A market that I think will pick up the pace further. But behind that, I still think people are a little cautious about the impact of the election, what that could do to regulatory policy. To me, it will be an improving market, but there will be big forces that will swing it up and down along the way.”

From a strategic perspective, some diversified technology companies find themselves navigating this uncertain backdrop with a two-step approach to assessing whether the moment is right for deals. And along the way they have discovered new challenges.

Jarrett said Uber’s two largest businesses, ride-hailing and Eats, have had two very different experiences through the pandemic, and that affects how the parent company looks at transactions.

“Ride-hailing has fallen off significantly, and so we’re trying to figure out what does the recovery trajectory look like?” she said. “And then we have Eats, which has just been booming, and every week the growth accelerates. But we ask, ‘Is that sustainable or not?’ And so, as we look at different targets in the space, we do think a lot about, you know, what does trajectory look like going forward? What’s the worst-case scenario, what’s the best-case scenario and so forth. And just knowing that we’re not going to be able to rely on projections or research analyst reports like we used to be able to do.”

These challenges lead companies like Uber to spend a lot more time laying out their own projections of potential targets.

“We spend a lot of time just understanding where can we get additional value out of an asset, where is the synergy opportunity, how can we make things more efficient?” she added. “At the end of the day, I think it definitely requires a greater leap of faith on deals than things have been in the past where the numbers were a little bit more black and white. Everything we look at, we just have to make a decision — is this something we’re willing to take a little bit of leap of faith on knowing we’re not gonna have 100% certainty or even 50% certainty on what the future might look like? That’s been the biggest change.”

Tech companies, and tech-enabled companies in various other sectors, are experiencing volatility in the market that would try the patience of even the most veteran dealmakers. That’s made narrowing down valuations particularly challenging, Cooley’s Leigh explained, especially as the firm is seeing stock used as deal currency about two times more frequently this year than in 2019.

“It takes a real patience level to watch the market change so rapidly and still believe in the fundamentals,” she said. “That’s the area where I think our boards, rightly so from a fiduciary perspective, are sort of taking things one day at a time to ensure that holistically the valuations are holding now that we’ve popped back up into sort of pre-Covid numbers.”

Because traditionally, tech company management teams who have best weathered the storm have had a very thick skin.

“We’re talking about a sector here that believes in innovation and change,” she explained. “But we also have an environment now in the tech sector that’s quite sophisticated and quite mature. We have entrepreneurs who are on company No. 3 or No. 4 and [venture capital] and private equity shops that know what it means to be a late-stage investor. It’s an entirely different ball game than it was even five years ago, and for sure, 10 or 15 years ago. I’m encouraged by the confidence of our management teams, putting different kinds of strategies to work to continue to see the long game in their companies.”