Are Deals Getting Done During the COVID-19 Pandemic?
The COVID-19 pandemic has brought a sense of uncertainty to business owners, strategic buyers, and private equity groups who continue to gauge the long-term ramifications to the stock market.
In this episode of Deal Talk with 7MA, Ariail Barker and Andy Johnston explore a recurring question in the M&A space, are deals getting done during the COVID-19 pandemic? They examine how businesses are handling the fallout from the pandemic and how the team at 7 Mile Advisors has been able to help clients overcome these obstacles.
Andy Johnston stresses deals ARE getting done. As the pandemic took hold, and the stock market was rapidly atrophying, uncertainty gripped the M&A world. However, companies appreciated that there was still plenty of value in acquisitions, whether it was making investments or acquiring other businesses to accelerate their growth.
Many business trends accelerated exponentially, especially in industries such as IT services and outsource business services. IT services benefited immensely from companies implementing robust IT solutions for employees working from home as well as the rush to replace manual processes with software-driven solutions.
For both investors and strategic buyers, it “really made it more urgent from their perspective to go acquire certain companies that were filling gaps and meeting the needs of their clients at a faster pace than they could accomplish just through organic hiring or other organic means.” (2:33)
Andy also tells us how 7 Mile clients (mostly in the IT Services space) have become very comfortable with the remote delivery model, although it does depend on the type of client and industry vertical. For instance, companies dedicated to oil & gas have been restricted from traveling, which will, unfortunately, affect their industry. However, companies highly involved in e-commerce (5:10) are often sought after.
With this said, valuations have rebounded to pre-pandemic numbers, and the stock market has shown incredible strength. The only challenge is to keep that strength high, as Johnston puts it, “[s]o what we’re really seeing is a focus on enduring growth. Making sure that the reason that the company is experiencing growth this year is not a one-time, short-term need. And two, that their delivery model is sustainable.” (15:48)
Deal Talk with 7MA, a bi-weekly podcast by 7 Mile Advisors that aims to give listeners a look behind the curtain of the middle-market Mergers & Acquisitions world. 7 Mile Advisors is a middle-market M&A firm based out of Charlotte, NC, that provides investment Banking services and advise on mergers, acquisitions, and private capital transactions around the globe.