10 Jun Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from M&A Source entitled “What is Needed to Restart M&A Markets Post-Pandemic?” discusses the likelihood of M&A activities coming back and what it will take to get there.
Prior to the COVID-19 pandemic, M&A activities were very strong with plenty of deal making. However, this all came to a halt due to the pandemic. Will M&A activities revert back to pre-pandemic levels? The author feels they can, with cooperation between sellers and buyers.
Valuation is based on past financial performance. A drop in cash flow, which has happened for a large number of businesses during the pandemic, would typically mean a drop in value. But this time, the drop is not due to changing consumer preferences or technological advances, it’s due to a one-time global health crisis. In this case, sellers and buyers can agree to treat this as an anomaly and adjust 2020 cash flows accordingly.
A recent blog post from Allan Taylor & Co. entitled “Are Business Owners Facing an Exit Plandemic? [SURVEY RESULTS]” discusses the results of a survey of 39 business owners about their intentions to sell their business and how COVID-19 has impacted their plans.
Key takeaways from the survey results include:
- Prior to COVID-19, 31% of respondents planned to exit within the next 5 years and 36% planned to exit within the next 2 years
- Due to COVID-19, 23% said their plans to exit are on hold indefinitely, 23% said their plans to exit are on hold temporarily, and 54% said there is no change in their plans to exit
- 59% of respondents said their intended exit strategy is to sell to an outsider
- 51% of respondents said their business value is down temporarily due to COVID-19
- 62% of respondents said 2020 sales will be down significantly and 28% said 2020 sales will be down slightly
- 46% of respondents said their business will recover but it will take more than a year to do so and 26% said their business will recover quickly
A recent article from Lexology entitled “How Does COVID-19 Affect Buying a Business?” discusses key considerations for those seeking to buy a business in light of COVID-19.
These key considerations include:
- Valuations have become more challenging due to the pandemic shutdown impacting 2020 financials
- Ease of obtaining financing, how long it takes to close, and financing terms have all been impacted
- Due diligence has become more intricate as the need to dig deeper has increased, yet due diligence is more difficult to accomplish due to restrictions on in-person meetings and activities
- Agreement conditions, representations, warranties, clauses and covenants are evolving