How are companies thinking about acquisitions?

The volume of new deals has plummeted. It is the late-stage deals that have helped in keeping the charts up

Companies are now considering innovative ways to conduct due diligence, in-person meetings, combat cyber threats from WFH, etc. leading to extended deal timelines

Companies looking for cash to serve debt or invest in the post-Covid world will resort to divestitures

Valuations using comparable transactions entered before January will be stale

Use of debatable Covid add-backs to ‘normalize’ EBITDA to increase valuations

Sellers will ask for clauses in early-stage agreements to avoid re-negotiations and combat closing risks

Earn-outs as a way of compensation will be in vogue

Tighter covenants for debt-financed deals in the PE space

Predicting the economic impact of a pandemic is onerous and rarely accurate. The SARS outbreak in 2003 forecasted a good two years for the global economy to recover. In reality, it took less than a year for IPOs and deals to rebound.

It is critical to point out that while the crisis of the past affected businesses and thus M&A, this one has also affected the way M&As are conducted, which I deem is quite revolutionary

It would be interesting to see how we move from here!