04 Jun Around the Web: A Week in Summary
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A recent article from Axial entitled “Lower Middle Market Deal Makers Lean Into Digital Tools” discusses how deal making has taken on an increased level of digital activity due to the effects of COVID-19.
In recent years, digital tools have already become a significant part of deal making. Online deal sourcing, virtual data rooms, and back-office technology are some of the ways deal making has gone digital.
The COVID-19 pandemic has caused an increased need for digital activities as in-person meetings have come to a sudden halt. Video conferencing is now being used for negotiation and due diligence. However, most deal professionals feel only so much can be done digitally and at some point in-person meetings are necessary in order to close the sale.
A recent blog post from Exit Strategies Group entitled “Valuing a Business in the Time of COVID-19” discusses the processes involved with and benefits of valuing your business during a situation such as COVID-19.
Difficult times can sometimes bring a sense of urgency to make a quick decision. However, it is better to slow down and analyze. A valuation does just that. Three key inputs for determining value include cash flow, growth and risk. Once a formal valuation is completed, you’ll know how much your business is worth today.
Once you know what your business is worth, you can start analyzing your options. Options may include developing an exit strategy, option plans, gifting and bankruptcy.
A recent article from Mondaq entitled “Looking To Buy A Business? M&A Due Diligence In The Age Of COVID-19” explores important considerations for buyers in light of COVID-19.
Buyers who are well-prepared and well-positioned to make an acquisition may be seeing more opportunities to purchase a business in the coming months. These opportunities are likely to be different than a typical acquisition, however, due to the effects of COVID-19. Many businesses have had to make significant changes and decisions in order to survive.
The following questions should be raised during due diligence:
- Third Party Agreements – Is the business in default of any contractual obligations? Have any arrangements been made to defer or alter contractual obligations?
- Supply Chain Disruption – Have any suppliers been unable to fulfill their obligations? Can the business pivot to another supplier if needed?
- Insurance – Does the business have any insurance policies with coverage for ongoing or future losses due to the pandemic?
- IT Systems – Are sufficient systems in place to ensure productivity and facilitate staff functions? Do these systems have ample security?
- Employees – Have there been layoffs, changes in compensation, or changes in responsibilities that may involve liabilities? Are there clear policies to protect the safety of employees?
- Government Benefits and Measures – Has government aid been accepted and have all related requirements been met? Have taxes been deferred?