Now may be the right time for growth
COVID-19 and the ensuing economic downturn have impacted nearly every industry, including travel and hospitality, sports, construction, finance and health care.
Given the present climate, it’s no surprise that 65 percent of current mergers and acquisitions have been temporarily halted or stopped altogether. From current valuation gaps to talent retention issues to thinner budgets, companies are hesitant to buy or sell with so many uncertainties on the horizon.
While these challenges have forced some business leaders to shy away from M&A, now could be the perfect time to accelerate the search for growth opportunities, thanks to low interest rates and available financing options.
Here are some things to keep in mind when looking to strategize business growth and deals.
Check for new financing opportunities
With interest rates at a record low and many financing incentives from the CARES Act still on the table via the Small Business Administration, business owners have a chance to be strategic about financial allocation and repayment.
Some existing loans also may qualify for deferment or repayment relief (i.e. the SBA may pay up to six months of principal, interest, or any other associated fees borrowers owe). It’s worth checking with a financial adviser or your in-house finance department to determine which options could work for your business.
In order to find a deal that checks all their boxes, business owners may need to wade through a few more options than they typically would, or keep a conversation going for weeks or months longer than they originally anticipated.
Prior to the pandemic, dealmakers would have met at their office, or perhaps a coffee shop, to go through the details and negotiate. Now, most of these negotiations take place virtually — if they take place at all. This creates new challenges. Business owners and investors must find new ways to review important documents and watch out for scams.
It’s also much harder to get a good read on a potential partner or build a relationship without meeting in person, so try to be flexible, build trust and use tools like Zoom, Google Hangouts, or Microsoft Teams to speak face to face.
Reach out to existing connections
While it’s difficult to build a new relationship right now with someone you haven’t done business with before, it’s much easier to seek out people who have already partnered with the company or CEO. For private equity specifically, there could be people willing to make a deal or who are looking for an opportunity. Rather than start from scratch with a new partner, utilize business leaders’ existing networks.
Knowing that many business owners may be hesitant to buy or sell right now, people in the position to make a deal may be sensitive to reaching out to past partners, especially those in industries hit hard by the coronavirus. But if organizational leaders make the first move, they can help ease that tension and proactively reassure investors they’re making a good investment.
While the current situation has complicated mergers and acquisitions, it shouldn’t erase them altogether. If your business is in a good spot — and you’re working closely with your financial advisers — making a deal now is a great way to stand out among competitors and set your business up for success further down the road.
Bob Lester is President and CEO of Dura-Seal