The end of the COVID-19 pandemic seemed to be on the horizon until the Delta variant showed up, bringing with it the potential to shake up the deals market once again.
As the end of the year approaches, dealmakers have to navigate the ongoing unknowns of the pandemic along with the other factors that are tightening the pressure valve on M&A this year.
“I suspect this year is going to be just as tight [as last year], if not tighter,” Rebecca Brophy says on this episode of Deal by Deal, talking about the haste at which dealmakers will need to get things closed while operating under a breakneck volume of deals.
Also on this episode, hear from DuneGlass’ Ryan Graham and Daniel Hosler about why they made the switch to independent sponsorship from private equity: “We tried to build something a little more founder-centric,” Ryan says.
With their focus on healthcare services and medical practices, Ryan and Daniel share their thoughts on healthcare investment opportunities.
Meet Your Hosts
Name: Gregory Hawver
Title: Partner at McGuireWoods
Specialty: Greg represents private equity and strategic clients in a wide variety of change-of-control transactions, minority equity investments, domestic and cross-border acquisitions, recapitalizations, joint ventures and corporate reorganizations, as well as advising clients on day-to-day corporate matters.
Connect: LinkedIn
Name: Rebecca Brophy
Title: Partner at McGuireWoods
Specialty: Rebecca focuses her practice on advising private equity funds, other institutional investors and strategic acquirers in connection with mergers and acquisitions and other complex business transactions.
Connect: LinkedIn
Name: Jeff Brooker
Title: Partner at McGuireWoods
Speciality: Jeff focuses his practice on advising private equity funds, venture capital funds and other institutional investors and strategic acquirers in connection with mergers and acquisitions, early- and late-stage investments, leveraged buyouts, recapitalizations, management buyouts and secondary transactions.
Connect: LinkedIn
Meet Your Guests
Name: Thomas J. DeSplinter
Title: Partner at McGuireWoods
Speciality: Tom is an accomplished dealmaker and partner in the firm’s M&A and Corporate Transactions Department.
Connect: LinkedIn
Name: Ryan Graham
Title: Managing Partner and Founder at DuneGlass Capital
Speciality: Ryan focuses on identifying and implementing cost reduction and growth opportunities to drive meaningful improvement to the bottom line. He has deep operational expertise with a track record of growing EBITDA through revenue and margin improvement.
Connect: LinkedIn
Name: Daniel Hosler
Title: Managing Partner and Founder at DuneGlass Capital
Speciality: Dan has operational and deep deal experience, having started three companies and spending 15+ years in private equity. He knows the universe of buyers, what private equity looks for in a deal, and how to make operational improvements to increase the value of a medical asset.
Connect: LinkedIn
Acquired Knowledge
Top takeaways from this episode
★ As the duration of the pandemic remains unknown, don’t expect a repeat of 2020. The Delta variant of the coronavirus has changed the course of how we thought the pandemic would end. Rising cases and potential lockdowns have the power to shake up M&A deals, but that doesn’t mean anyone should panic. Nobody wants another wave of lockdowns. Additionally, the anxiety that caused deal flow to plummet when the pandemic first started isn’t likely to repeat.
★ In a seller’s market, independent sponsors have a bit more leeway to get creative. Because of how strongly biased the market is toward sellers right now, it’s hard for buyers to set very many conditions about the deals they make. But independent sponsors have a leg up due to their personal relationships with buyers that allow for more thoughtful transactions. Right now, it’s a bonus to be flexible!
★ The rest of the year is going to be busy. There is a general consensus that the next few months are going to be a busy time for M&A — the QV market is particularly backed up. It’s not quite yet at the point where people are turning away work, but getting deals closed before the end of 2021 is going to be very tight.
Episode Insights
[01:41] Independent sponsor networking: McGuireWoods Partner Greg Hawver previews the fourth annual Independent Sponsor Conference, which will be in Dallas in October.
[08:16]: Keep your finger on the pandemic pulse: Jeff says that he doesn’t think purchase agreement language is going to completely change with the new wave of the pandemic, and that the tools we’ve previously developed will likely still stand. But he points out that it’s a fluid situation.
[12:22] Less fear of the unknown: Rebecca points out that, while the COVID-19 Delta variant is posing challenges to the market, she would be surprised if deals froze as much under a potential Delta lockdown as they did at the beginning of the pandemic. Now, people know what to expect a little bit more.
[16:20] Gearing up for a busy season: Gregory, Rebecca and Jeff all say that they’re seeing less legal bandwidth to help independent sponsors close out deals during this busy market. Thanks to possible changes in tax law, getting over the initial pandemic slump, the continued trend of retiring baby boomers, and more, dealmakers are in for a packed end of the year.
[22:21] The political backdrop: Gregory says that although the election of President Biden took place last year, people are now starting to wonder if he will enact some of the tax regime changes he said he would. New tax codes would have an impact on deals.
[28:06] Keeping an eye on healthcare macro trends: Daniel says that DuneGlass looks at large healthcare macrotrends when deciding which deals to pursue. One macro trend he mentions: As baby boomers age, demand for joint replacements is likely to surge.
[29:08] The golden age of biotech: Daniel says that even though he’s not a biotech investor, all healthcare investors and independent sponsors should become more familiar with the world of biotechnology. Even if you’re working in the middle market, you’ll be able to pick up on trends throughout the healthcare industry by paying attention to emerging technologies.
[30:56] Why go the independent sponsor route: Ryan talks about why he and Daniel wanted to make DuneGlass an equity partnership fund that invests in small, founder-owned companies that can make a difference in the healthcare industry and in the lives of the people starting the companies.
[42:47] Learning from mistakes: Daniel says that he and Ryan pay attention to the mistakes that both of them made at private equity firms. They’ve developed a specific playbook to look at management services under the guidelines of, and they make sure to take it into consideration with every new decision they make.
[44:22] The future of independent sponsorships: Daniel says that he sees the rest of the investing world catching up to the benefits of the independent sponsor model, and sees a future in which this model becomes more and more dominant in the deal-making sphere.
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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.
