Like everyone, I am focused on the Coronavirus epidemic and the threat it poses to all of us. Fortunately, I can say that my wife and I are doing as well as can be expected in self-isolation at our home in Madison, CT, and our kids are all healthy. I hope this is the case for all of you. Given all that is going on, it may be trivial to focus on our companies, but inevitably our minds drift to wondering how this will all resolve. In every business, uncertainty is the cross owners have to bear while they try to make sense of their markets. I am no different, and because I now have a bit more time on my hands, I will weigh in with my prognostications for my M&A practice.
For sure, things will be tough in the near term. Currently, our firm is representing a number of owners, and we have been communicating to them that we believe that until the picture clears, it may be tough for most of them to get a deal done because that is what buyers are telling us. Interestingly though, among the firms we represent, two are considered “essential” businesses. Both continue to operate at the levels before the crisis because they are the types of businesses that provide services needed in any environment. The buyers of these firms and the lenders who are financing the acquisitions are still planning to close as soon as possible with sale prices set at fair multiples. This tells me two things: even in this market, investors will still buy businesses that have a clear economic path, and the capital is still available for them to do so. While I am sure there will be a decline in deals done this year, businesses that continue to show resilience in this environment can be sold. How much the M&A market declines will depend upon how long the crisis lasts and the effectiveness of the government response. Pray and hope for the best.
What should a business do if it is not the right time to sell? Hunker down and take the opportunity to improve what you have. Often doing simple things that don’t require a lot of capital add a great deal of value to a firm. Improving your financial and operational reporting as well as developing your staff are two suggestions. Buyers of businesses, particularly sophisticated ones, place a lot of stock in improving these parts of a business.
Like most M&A firms, the last number of years have been good to us, but like everyone else, we are preparing to weather the storm. While doing so, we are always available to advise our clients on possible exit strategies, to give Opinions of Value at no charge, and lend a helping hand to assess when and how to sell their business. No two businesses are alike, and if you wish to speak with us on how and whether or not to proceed with a sale, then please call and we’d be happy to give a frank assessment. In the meantime, stay safe and well.
Resources for business impacted by the COVID-19 Crisis
If you looking to tap some of the lending programs made available by the COVID-19 relief package just passed by Congress, then the best place to start is to click on the links below.
Note: Owners seeking relief should speak with the SBA on the Federal level and the DECD on the state level. You can apply for the funds on-line.
The SBA will be the primary agency through which relief funds will be channeled to small businesses.
SBA Disaster Relief Program: Apply Here
The State of CT through the DECD has also rolled a disaster relief loan program for small businesses.
DECD Disaster Relief Program: Apply Here