Greetings from the M&A team here at Shulman Rogers! First and foremost, we hope that you, your family and your team remain healthy and safe during these difficult times.
We are now more than a month into the U.S. COVID-19 shutdown and several months into the broader global crisis. The impact on U.S. and global M&A activity has been both sudden and severe. Global M&A for Q1 2020 is down 33% as compared to Q1 2019; and the value of announced mergers in the U.S. is down more than 50%. Among the many factors exacerbating this already difficult situation are the increasing scarcity of debt financing for new acquisitions as banks are preoccupied with SBA lending and other urgent client needs, as well as the challenges that buyers and sellers have in fixing and agreeing upon valuations as many industries contract due to the global downturn.
Not surprisingly, most parties that were considering M&A transactions before the onset of the pandemic have either put those transactions on hold or abandoned them. Nevertheless, some deals are moving forward, including deals where the target or its industry are insulated from the effects of COVID-19, and where the target’s business has increased as a result of the pandemic.
For the companies delaying or abandoning deals, their focus has rightly shifted to shoring up their businesses as they prepare for a longer downturn. We have assisted many of our business clients in addressing the immediate challenges facing their businesses as they navigate these turbulent times. Perhaps most critical, we’ve helped them obtain financial relief through millions of dollars of SBA-backed Payroll Protection Program loans and state and local loan programs.
While we don’t have a crystal ball to tell us how long this crisis will last and when M&A activity will spring back to life, if there’s anything that we’ve learned from prior downturns, it’s that bad times don’t last forever. Every downturn creates opportunities for growth and progress. Those opportunities are not always obvious, and they often come and go quickly. But they will be there for those ready to seize them, and readiness will be key.
Maybe a company you were looking to buy can be acquired now or in the near future for a much more attractive price. On the sell-side, maybe your company suddenly is in a hot industry – think personal protective equipment, cleaning supplies or online social networking – and you have the ability to sell now at a significantly higher price than you could have fetched pre-pandemic. Again, some deals actually are moving forward now and getting done, and maybe yours could too.
Bottom line: parties who are ready and able to move quickly will be best able to capitalize on the opportunities arising during and after this pandemic—which begs the question, “Are you ready to move quickly?”
For sellers, “being ready” means:
For buyers, “being ready” means:
In the meantime, we encourage you to visit our COVID-19 Resource Center, where you will find articles, legal alerts and webinar recordings addressing a wide range of topics, including SBA-backed loan programs, human resources and employment issues and insurance matters – you’ll find them to be both useful and practical.
And, be on the lookout for additional releases from the Shulman Rogers M&A team in the coming weeks as we continue to monitor developments relating to the COVID-19 pandemic and its impact on the M&A world. Until then, be safe and take good care.
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or feel free to contact a member of the Mergers and Acquisitions Team.
Stay up to date with all the latest news and events.