22 Apr Around the Web: A Week in Summary
A recent article from BizBuySell entitled “COVID-19 Stalls Q1 Transactions; Presents Once in a Lifetime Opportunity for Acquisitions” provides insight into the current state of the M&A market as well as actionable advice for both owners and buyers at this time.
Following the promising start to 2020, transactions took a 43% dip in response to the Coronavirus pandemic. However, the quality of the businesses that were sold improved based on recorded metrics. While many businesses are currently required to be closed, and the economy has been deeply wounded, the circumstances present a stunning opportunity for willing buyers. At this given time, buyers who are prepared can not only close the deal of a lifetime because prices are being driven down, they may also qualify for the SBA Debt Relief Program released this year. Owners can take multiple actions to increase the appeal of their business, with the most important focus being on reducing the risk the buyer would be taking upon acquisition.
A recent article from Thomas Publishing Company entitled “Has the M&A Market Caught a Virus Too?” evaluates the implications of the Coronavirus on the M&A market.
It’s no secret that given the current circumstances, M&A activity has begun to slow. However, the reality of this downturn is much different than in past years, when the damage has been a result of economic problems. The external factor that is forcing a cessation of demand in this scenario is merely causing deals to be put on hold rather than stopped all together. For investors who are ready to weather the storm, there are great rewards on the other side of it. That being said, for the time being, the first priority is to ensure liquidity and solvency. Businesses have to survive the downturn before they can consider other options. Experts estimate that the current downturn will last approximately nine months before things start to look up again and considering the natural flow of the market, it is likely to be a buyers’ market for a while. Before COVID-19 it was a very strong sellers’ market, so this change has created space for a more level playing field.
A recent blog post from Exit Strategies Group entitled “COVID-19 Exit Planning Insight: Keep a Journal” suggests that business owners begin keeping a real-time record of all relevant events and decisions during the pandemic.
When a business is sold, it is necessary to share the past three years of financials. Inevitably, the COVID-19 crisis will impact these records and leave the buyers with some pointed questions. It is in the best interest of owners to maintain a real-time record of every business decision that could impact the future of the company. It’s important that owners not try to rely on their memory and that they include things like the rationale behind the action and its expected outcome. Types of events and decisions to document include financial, customers, marketing, suppliers, employees, products & services, and strategic. When it comes time to list your business, your business broker can help you to tell your unique story, which will rely on accurate logs from this fragile time.