30 Apr Around the Web: A Week in Summary
A recent blog post from Exit Strategies Group entitled “Can you sell a distressed business?” explores the factors that impact the salability of a business in distress.
The ability to sell a distressed business is largely dependent on the ability to find a buyer who believes that they have the skillset and resources to turn the business around. In general there are four categories of distress:
- Manageable impact, event driven
- Unmanageable impact, event driven
- Manageable impact, systematic
- Unmanageable impact, systematic
COVID-19 would be considered unmanageable impact, event driven. In this scenario, it is unlikely that a new owner would be able to run a business any better than the current owner. However, under certain circumstances a good business broker would be able to attract a buyer that is able to utilize the businesses’ current resources to stay afloat by offering a different product or service that is currently in high demand.
A recent article from Forbes entitled “The Good News For Your Business Valuation During Unprecedented Times” explains why the current pandemic is likely to have a smaller impact on your business valuation than you might think.
Business valuations are less likely to be impacted for most businesses for two reasons:
- Recasting The Financials – This practice allows a business broker to adjust the financials to compensate for any expenses or loss of funds that are considered unrelated, unnecessary or unlikely to happen again. A pandemic falls into the last category.
- Forward-Looking Business Valuations – A business broker will assess both the historical performance of the business as well as the future facts of the business. Both play a role in how much a company is worth.
A recent article from Axial entitled “A Shift in Investment Strategies Post-Coronavirus – COVID-19 Virtual Roundtable” highlights the main talking points in a discussion regarding the current pandemic between nine Axial members.
In this week’s virtual roundtable, experts address topics including new and innovative capital structures, how government stimulus funds are impacting the private capital markets, and what’s happening with transaction dynamics. According to the nine members:
- PPP funding is helpful for businesses that are impacted immediately, and those in the service businesses who need to keep employees on the sidelines. For other types of businesses they may pose some obstacles.
- Permanent Equity rolled out a program called Safe Harbor that offers creative capital solutions to businesses struggling from the pandemic.
- Transactions have slowed but not come to a halt. Many transactions are likely to be on pause until an in-person negotiation is possible.
- Strategic buyers are on the market less, making more room for financial buyers to experience increased deal flow.