In General, Value Enhancement

As business owners work to get through the impact of COVID-19, many are wondering how their situation will affect M&A activity. In the short term, some companies may conduct acquisitions at a slower pace. That’s natural in uncertain times. But market conditions are different since our last recession. The good news is that many companies and private equity firms have been doing well for years. They have record amounts of “dry powder,” that is undeployed capital ready for investment.

What that means is that the pool of business buyers is not going to dry up. Market competition has been incredibly strong up until now, and many buyers are going to stay active — in fact, some will become more aggressive in order to capitalize on the current climate. And with the Federal Reserve cutting interest rates to 0%, buyers may decide they simply can’t afford not to push ahead with acquisition plans.

In the meantime, if your business is going through a slow period, consider how you can use your downtime:

  • Strengthen marketing: Update your value proposition. What are your three distinct signature strengths that set you apart from the competition? Make sure this information is current on your website, marketing materials, presentation decks, etc.
  • Recruit new talent: If your business is still in a good place, use this time to seek out great talent that wasn’t available a month ago.
  • Brainstorm new ideas: Plan ideation sessions with your employee team and brainstorm business development opportunities. Look for ideas that will make you successful in a normal business environment and consider how you might thrive through future pandemics.
  • Document procedures: Get your secret sauce down on paper. A business is more saleable when there’s less risk involved. And there’s less risk when all systems and procedures are documented on paper instead of squirreled away in the owner’s mind.

When it comes to selling your business, timing is important. With the longest bull market in history, we all knew there would be a correction coming. But we expected the trigger would likely be some kind of political or global conflict. No one had pandemic on their radar as the next economic crisis.

M&A markets align with business confidence. When things are normal and steady, buyers feel comfortable spending. When it’s unpredictable or volatile, that’s when people pull back. Conditions are not all doom and gloom, however, and buyers and sellers both have opportunity to emerge as winners in the months ahead.

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