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M&A In The Time Of Covid-19

Well, Symmetry have had a very busy first quarter of 2020. We have been working with clients in a range of sectors, including Tech, Media, Leisure & Industrials. Our clear view stands that it is effective planning & execution and not sector specificity that results in successful business sales on terms that work for sellers. We also have a deal completion announcement pending. Watch this space for more details, as soon as the conditions for business PR are improved.


Right now though, no-one is interested in news & insight into much other than the impacts from the Public Health crisis which has turned the commercial world upside down.


Which is a neat segue into my primary topic...




What will the Covid-19 pandemic mean for business owners looking to sell? For timing, for valuations and the appetite of potential buyers?


Firstly, I wish you, your families and colleagues safety and good health at this difficult time. I know this will be every business owner's priority. But providing for yourself and others remains important and maintaining our economic health must be an essential part of the fightback against this virus over the longer term.


The business community on the internet is, rightly, mainly discussing how best to adapt and manage through the sharpest contraction we have ever seen. Clearly, the meetings in person and site visits that are nearly always necessary to a business sale process can't happen for a while. And who can place any confidence in forecasts or budgets that were produced even a couple of months ago? So acquisition processes are, for now, mostly stuck.


However we are going to take a minute to look towards the other side of this, after restrictions have eased. You can be sure that the M&A market will experience a lag relative to day-to-day consumer spending picking up and working it's way through supply chains. But at some point, whether that's 3 weeks or 6 months from now, things will normalise. There may be some false starts. There will certainly continue to be good businesses and employees taking hits. Nevertheless, once business as usual resumes, some sellers & investors will be ahead of the game and others not.


So which will be which?


We saw following the 2008-9 Financial Crisis that acquirers and investors didn't wait too long following stabilisation to begin seeking good quality businesses to purchase. Some will be opportunistic, hoping to pick up bargains off the back of a combination of targets' lower than normal reported earnings and, frankly, exhausted business owners. Others will be more strategic, having robust balance sheets which held up well throughout the year, prepared to pay a fair price for a great business. So we will continue to espouse the same principles governing valuation following this crisis as beforehand. If a seller is sufficiently pro-active and disciplined in ensuring they are sourcing and screening the right types of strategic acquirers in a controlled, fair, competitive sale process, valuations can be achieved which reflect the future potential of the business. A seller need not then accept a valuation which has been artificially suppressed by the current exceptional economic conditions.


In order to be in a position to get the best deal from the best buyer in their sector, sellers will need to be ahead of the curve. They should become a First Mover by making sure they have a business adapted to the times, a trading uplift, revised projections and an Information Memorandum in the proper format ready to go. In tune with the acquirer market and ready to be the opportunist themselves. Or someone else may get the benefit.


The window may open up 6 weeks or 6 months from now, but I suppose our advice could be summed up in two words.


Be Prepared.


(You can tell I was a Cub Scout).


Of course, not all target acquisitions are created (or perceived) equal. Businesses with the following characteristics will no doubt attract the first wave of investor interest:


Infrastructure Critical


Certainly, this includes food production & distribution. Healthcare businesses too (including consultancies, supplies, equipment, tech - demand in the sector will intensify when the mission to catch up to deferred procedures and appointments begins). And businesses in communications, tech, e-commerce, utilities & media supply chains are quietly keeping the wheels turning and therefore well positioned to post relatively decent results later in the year.


High Domestic Sales


Businesses with a good spread of customers within the UK will likely normalise faster than those with more dependence on international travel or goods exports. Even if export markets normalise ahead of ours, the fragility of our airlines has been badly exposed. International acquirers will have enhanced interest in acquiring locally-based footprint and capability.


Recurring Revenues


Having a subscription, contracted or otherwise recurring revenue model will bring even greater advantage, especially for companies that can show no downward blip to overall numbers over the next quarter or so.


Don't be concerned if your business is less core to public infrastructure, project based or export oriented. Your company is saleable too, but the timing & approach may be different.


But if you do recognise any of those attributes in your business, are considering a sale and want to beat others to the best deals of the year, then get ready - the early birds will win out.


In terms of order of business, follow your own good sense:


  1. Adapt. Take advantage of the opportunity to make positive, necessary changes you may not have been able to make in busier times.

  2. Ensure your administration and Management Information is in order and ready for a sale process & due diligence.

  3. As restrictions begin to lift, re-engage with your market. Re-establish your trading trajectory.

  4. Revisit your projections. Make them bold, but based on evolved, real-world activity, as far as possible.

  5. Draft your target acquirer list and Information Memorandum.

  6. Assess your profiled acquirers readiness to explore opportunities. If they have motive and can acquire, they will acquire.

  7. At the right time, commence your sale, bid and negotiation process.


A good Corporate Finance Advisor can support with all this, and actively deliver on 5 - 7. (you could do it all yourself, of course, just don't underestimate the hours and complexity involved!).


In the meantime, stay safe and forward looking. Everything we do right now, whether it's safeguarding businesses or supporting the community matters now as much as ever.


Jonathan Tate

2nd April 2020


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