M&As & Coronavirus – Focus on five steps to help you navigate the pandemic

You decided to undergo an M&A transaction and finally signed an LOI, but now there is a pandemic. What do you do now?

Breathe.

Chances are you had a solid plan before the coronavirus hit us all. Review the strategic plan.

It’s natural to be fearful, but you can channel that emotion into motivation and innovation.

Although you may not be able to have meetings in person, you can do the following whether you are seller or a buyer:

1. Prioritize your employees. You really have no business without them.

2. Check in with your customers and vendors – How are they faring? Agreements aside, they are all being impacted by the coronavirus so try to maintain those relationships with real conversations.

3. How strong is your balance sheet? I spent a lot of time analyzing company balance sheets during the last recession in 2008. You really should:

• Analyze your working capital & cash flow requirements – how long would your cash flow last? 2 months, 6 months or 18 months?
• Review your loan covenants and other capital sources to make sure you understand the implications of a cash flow shortfall and what your options are to fill any gaps.
• Perhaps draw on that line of credit, just for a cushion. Again, planning is key.

4. For financial sponsors – It may be time to look at your mandate and reduce that dry powder. Consider opportunities, particularly distressed assets.

• The focus for many financial sponsors is on making sure that their companies are running smoothly irrespective of possible illness, travel bans, supply chain and operational disruptions. Is there flexibility in your G.P. / L.P. commitments? Can you provide infusions to your portfolio companies?

5. Deal delayed? Continue your diligence – financial/QofE, legal, business etc. Most of your advisors are business as usual, and have always had remote working capabilities.

When this pandemic is behind us, the good news is that it is one-time, unusual and non-recurring in nature and its financial costs can possibly be added back to EBITDA when you assess your deals.

We are here to help – Reach out to the Anchin Transaction Advisory team for assistance in tackling any of the above.

Stay safe and remember, health is wealth.