How Buyers Should Approach Today’s M&A Environment
While the coronavirus-induced economic downturn has prompted a slowdown in sell-side M&A activity, many of our buy-side clients continue to have conversations with targets and work toward closing deals.
Amid the current uncertainty, it’s as important as ever for buyers to stick to their growth-through-acquisition strategies and disciplined processes to maintain a full pipeline of opportunities and accomplish long-term goals.
At Copper Run, we preach developing a process and pipeline of potential targets whether you are a strategic, private equity or family office acquirer. In an environment in which organic growth may be difficult to come by, there are still great opportunities to gain market share and expand into new territories.
Here are some things to think about as you consider your approach to M&A.
No matter the broader economic conditions, buyers should always remain active and keep lines of communication open. That means keeping in touch not only with prospective sellers but also with financing sources such as commercial banks and private equity firms.
The ineffective alternative would be to shut down the M&A process. With that approach, it would take months just to get back up to speed with a corporate growth strategy, data gathering, and outreach efforts. Because a deal can take up to 18 months from the point of first conversation to closing, any pause today will have delayed effects far into the future.
Those who are actively executing an M&A strategy will be rewarded when it comes time to close a deal.
These are unusual times so be prepared to adapt—both in the way deals are conducted and their terms.
For instance, almost all meetings are being held via phone or video conference and term sheets are being submitted based on remote meetings. Additionally, due diligence is shifting largely from in-person to electronic. And if it’s necessary for a site visit to be conducted before a deal is closed, buyers are taking precautions such as wearing masks and practicing social distancing.
As for deal terms, buyers may want to consider de-risking by entering joint ventures rather than pursuing outright acquisitions.
Some aspects of M&A may permanently change, such as a greater reliance on remote communications. By executing plans now, and by emphasizing the things we can control, buyers will successfully navigate the M&A environment.
Now more than ever, an advisor is critical to helping establish and execute acquisition plans. Copper Run offers comprehensive buy-side advisory services, helping to efficiently find and execute proprietary add-on acquisitions and allowing you to focus on operational responsibilities.
We perform all proprietary list gathering, initial target diligence, outreach efforts, and introductory calls. We streamline and optimize the diligence process to get to a Letter of Intent, assist with LOI negotiations between targets, bankers, and attorneys, and coordinate meetings. To best demonstrate this, Copper Run provides our clients bi-weekly engagement trackers and their own virtual data room to rack outreach, target status, notes, and next steps to ensure all opportunities are accounted for.
We believe accountability and clear direction is essential in completing transactions. If you or your clients would like to talk more, we are happy to help.
Andy Hays is President and Co-founder at Copper Run. He oversees firm strategy, operations, client services, and business development.