Virtual Roundtable Recap: 4 Critical M&A Dealmaking Lessons in the Era of COVID-19
"M&A Transactions in Uncertain Times" co-hosted by Divestopedia and SS&C Intralinks brought together legal, private equity and investment banking specialists to talk about M&A dealmaking in the current environment.
5 August 2020
I recently participated in “M&A Transactions in Uncertain Times,” a virtual roundtable co-hosted by Divestopedia and SS&C Intralinks, discussing M&A dealmaking in the COVID-19 era. Moderated by Divestopedia President John Carvalho, the panel was rounded out by veteran dealmakers Andrew Sherman, partner at Seyfarth Shaw; Rob Vanderbeek, managing director at Grant Thornton; Yoav Cohen; and managing partner and CEO at NYC Advisors, LLC.
Here are the four takeaways from the insightful conversation:
1. The due diligence process is evolving
Dealmakers have a challenging job at the moment. With revenue and earnings significantly reduced in most industries, the pandemic’s impact on valuations is profound as buyers and sellers assess the fluid situation. On top of that, John explained, the need for social distancing and the limits placed on travel make the process of conducting due diligence much harder.
Fortunately, as Andrew pointed out, technology has created efficiencies that hadn’t existed before. He pointed to tech who’s become invaluable in this climate. I noted that there are “a lot of technology levers to pull right now” that help you expedite the deal process,” pointing out the impact of speed on getting deals done.
While parsing that data, Rob added, dealmakers must imagine what a normalized cash flow would look like and risk-adjusted appropriately. The real focus is on the intangibles, he said, which are going to be the real valuation drivers.
2. Companies that are facing bankruptcy do have options
The panel agreed that in this difficult time some companies will undoubtedly find themselves needing to restructure or even liquidate. I explained that the sheer volume of companies facing possible bankruptcy is overwhelming right now, as is the uniqueness of the situations these companies face.
Yoav advised that it's a good time to renegotiate with creditors. In many cases, he said, a company can make deals that help avoid bankruptcy altogether. He added that companies might ultimately decide to sell and, depending on their current state, they might generate high value. With the right approach and data, a company can position itself well as a diamond in the rough.
3. Don't forget the power of empathy
Andrew suggested that in times of uncertainty, empathy can be a powerful ally. For companies struggling to remain afloat, those that have trusted, authentic and genuine relationships with banks, vendors and landlords can ask for leniency. He pointed out that supplier and vendor financing relief programs are available across many industries.
4. It can be an excellent time to be a buyer
Ultimately, however, this is a buyer's market, Rob explained, pointing out that strong advisors — both legal and financial — are crucial amid great uncertainty. Important on the buy-side, Andrew added, is the ability to find those diamonds in the rough and evaluate more intangible assets. Make sure you have the right industry knowledge, he said, as some industries are going to be hot over the next six to twelve months, while others are going to be quite cool. Dealmakers who recognize the difference early and can capitalize on that knowledge will do well.
To view the full discussion, click here to watch the video in its entirety.
Brian S. Hwang is Director of Strategic Business & Corporate Development at Intralinks. Brian joined Intralinks from RR Donnelley Global Capital Markets where he primarily worked with clients in the Midwest and Northeast, consulting on initiatives related to disclosure issues for SEC financial reporting, US Proxy compliance and transactional due diligence. Brian started his career with New York City law firm Wachtell, Lipton, Rosen & Katz, where he was involved in the due diligence and execution of transactions, valued at over $350 billion.