Chairman The Corporate Finance Network
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M&A interest rises as Covid-19 wreaks havoc on businesses

As businesses start to work through how they can build within the new Covid-secure parameters, Kirsty McGregor explores how a corporate finance service line can assist clients at this critical time.

15th Jun 2020
Chairman The Corporate Finance Network
Columnist
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Accountants will obviously need to help clients with both working capital and growth finance for months to come. Therefore, firms should ensure they have the necessary resources at hand – a process to review ‘whole of market’ options, understanding all the products on offer plus a contact book full of financiers to approach with proposals.

Aside from fundraising assignments, now is the time to consider whether acquisitions would make sense for some clients. The opportunity to purchase a business which is distressed, or where the business owner just does not have the energy for the fight, could really add extra assets, customers, staff and growth potential to another company.

During these unprecedented times, valuations could be much more realistic than pre-Covid, making a previously unattainable business now reachable.

Would a client consider purchasing another business?

When talking to clients about M&A one of the biggest challenges is the perception that it’s too much hassle and too risky.

Let’s face it, if business owners ‘in normal times’ had a lot on their plate, they could be completely frenetic now. But now could also be the perfect time to review where their business isn’t performing, either from a profitability perspective or for their desired lifestyle choices.

It could be that many of your clients have taken this enforced downtime to reconsider how they operate, what works well, and also what needs improving. It’s essential then that we open up that conversation with them now. 

If they appear inquisitive about acquisition and a purchase, you should go on to explain the process to demystify it and reassure them that a combination of due diligence, a lawyer’s work, the warranties/indemnities and the deal structure itself can all reduce any perceived risk.

Finding the target

A business which resolves any of your client’s own weaknesses and threats could provide the most synergy. Use the process of brainstorming a SWOT analysis with your client, so you can then research the market, to find a list of potential acquisition targets in a more focused way. 

Using company information databases, trade listings and LinkedIn, contact the most appropriate person at these businesses in a personalised way, to ensure your email won’t be dismissed as spam or a bulk mailing. Don’t forget the sensitive nature of the topic, so be careful your communications don’t fall into the wrong hands.

Open up conversations with potential vendors gently, offer a confidentiality letter early and allow them to dictate the speed of any negotiations. Times have been tough and it may take a seller some time to be sure they’re ready to exit. There is no doubt that one way or another we’re going to lose an awful lot of businesses from our economy.

So if one of your clients can take on that trade and employees and even create further growth, a negative could be turned into a positive.

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