M&A Post-Covid

Mergers and Acquisitions Post-COVID

The uncertainty brought on over the last year by the COVID-19 crisis has taught many new lessons to business owners and their advisors. As we move forward to a more stable economy, it is important to evaluate how Mergers, Acquisitions, and Business Valuations have been impacted and what to look forward to in M&A transactions.

The M&A Market 

The Mergers and Acquisitions market along with Valuations have been heavily impacted by the risk and uncertainty brought on by COVID and the change in the White House. We have seen some businesses come away with a higher valuation and some lower depending on the impact of the COVID crisis on their business and industry.

Buyers will significantly discount the COVID risks and adjust for this with a lower valuation or better terms to protect against the uncertainty and potential losses. On the other hand, businesses that are higher quality, less risky, and have a real or perceived ability to weather the COVID risk and its impacts will receive higher valuations. These businesses will be in greater demand and yield higher valuations.

This past year we have also seen the market shifting from a seller’s to a buyer’s market as the risk and uncertainty of both COVID and the change in the White House unfolded. One interesting lingering impact from 2020 will be the psychological effect on potential sellers who battled through the crisis and severe disruption to their businesses. This combined with the potential for increased capital gains looming on the horizon will no doubt spur many business owners to consider putting their businesses on the market sooner versus later.

In Conclusion

The M&A market will continue to fluctuate and become more complex as the economy continues to change. Business owners should be aware of how the post-pandemic world has impacted the value of their businesses. In addition to company-specific risks, companies now should include COVID as a risk factor for their businesses. The process of exiting a business will be in more demand in the coming years. Our recommendation is to stay up to date on what’s happening in the economy and the lower middle market to see how your business can potentially be impacted.

Read more about the M&A Market Here:

Creating Favorable Transaction Structures - Insights Into the M&A Market