What will Middle-Market Mergers and Acquisitions look like post-COVID 19?

Just like the GFC over ten years ago – the market for mergers and acquisitions has changed dramatically as a result of COVID-19. Availability of funding has significantly reduced due to the much higher uncertainty. The aging baby boomer generation, who have typically delayed retirement and business exit – but who cannot delay forever, adds pressure.

Distressed assets see opportunistic buyers already coming out to see what might be available, ‘at a good price’. Recently completed deals which included either performance covenants (imposed by lenders or private equity funders) or performance earn-outs over several years are all heading south rapidly and causing concerns for all parties.

Any transaction that is currently being negotiated or finalised is probably ‘on hold’. The outcome of COVID-19 is still very uncertain and we’re seeing a two-speed economy. For every business struggling in these times, there is also one that is excelling. The impact on future performance, growth options and strategy is very unclear and adds multiple complications to any deal.

Merger synergies that lead to cost savings and growth opportunities are popular targets for larger corporates, private equity firms and professional investors. All of whom are very fussy, sophisticated, mature buyers – poor preparation will never pass the muster.

The key here is both timing and time in, according to Warren Buffett. The future is never clear.

“Uncertainty actually is the friend of the buyer of long-term values.”

— Forbes, August 1979.

What does this mean from a sellers perspective? Be ready – always! There are plenty of long-term value buyers active in the market today. Proper preparation and planning take time, good strategy takes time. Those who leave it too late will never sell for the right price and maybe not at all.

Find out what your business is worth today, what are the key value drivers, how do you increase your attractiveness to a potential buyer and ultimately ensure you can maximise value and achieve a successful exit. Get in touch to speak with one of our Accredited Advisers.

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.