06-26-2020 | Blogs, Business Transactions, Mergers & Acquisitions

M&A During COVID-19

By: BrownWinick


 

If you’re wondering what impact the COVID-19 crisis has had on the M&A world, you’re asking the right question. There is no doubt this pandemic caused turbulence in the financial market, but it may not all be bad news. While some companies are treading carefully during this uncertain economic state, others are moving quickly to secure strategic and innovative M&A opportunities and preparing to turn crisis into opportunity. For example, Verizon recently acquired BlueJeans Network, a leading video conferencing and event platform, capitalizing on promising growth technologies. Companies with strong balance sheets and credit opportunities can take advantage of declining valuations to seize opportunities that create long-term value. Whether you’re ready to secure the next deal or still contemplating how to ride out the economic market, consider the following ways Covid-19 has impacted M&A deals. 

  • First, deals are still occurring, and companies are moving forward with deals negotiated before and during Covid-19. It is important to conduct focused due diligence, assess the current valuation or terms, and renegotiate if needed.
  • Companies are moving quickly to seize opportunistic M&A hotspots. If your market was hit hard by Covid-19, don’t be afraid to look beyond your core industry for target M&As. Companies are targeting innovative technologies, medical advancements, and delivery models- industries with promising valuation growth. On the flip side, industries such as leisure, retail, and other sectors more seriously affected by Covid-19 will be in distressed positions creating buying opportunities.
  • Be prepared to deal with challenges and changes in the M&A market. Changes in valuation, deal structure, talent retention, and internal organization will require creative thinking and adapting. While many deals will include provisions on Material Adverse Changes (“MAC”) to account and allocate the risk of Covid-19, consider the depth and proportion of those provisions and anticipate any unwelcome surprises. This may be the time to deploy scenario planning to be prepared for a fast-changing environment. It’s also wise to consider tools other than outright M&A. Forming strategic alliances can be a way to creatively resolve short-term chain issues.
  • Finally, consider revamping your M&A internal capabilities. Covid-19 has made acquisitions difficult to navigate and the environment may remain challenging. It is important to be prepared for the new changes such as extensive work from home operations, deal backlogs, accelerated deal integration, and an overall transformed setting. Use this time to develop and reposition your company to upgrade M&A operating systems, software solutions, skills, and resources. This will enable operations for any deal type, in any market environment and at any level of deal volume.

Whether you are an interested buyer seeking to seize an opportunity for long-term growth or a seller looking to maximize your deal negotiations, the attorneys at BrownWinick can help you navigate M&As during this crisis.