Looking Beyond - An M&A and Valuations Perspective

Events are unfolding with astounding speed, unveiling the outbreak’s repercussions on all sectors with some businesses suffering immediate and major distress. The global spread of the outbreak means that most, if not all, industries will face significant turmoil, and that disruption is inevitable.

As the outbreak and its repercussions continue to spread across the globe, companies and transaction participants are grappling with increased risk, uncertainty, and lack of liquidity. At this point in time, buyers and sellers are not only questioning their overall strategies but are also rethinking the very fundamental M&A aspects such as business valuations, pricing mechanisms and due diligence procedures.

It is true that the level of impact will vary across various industries and organisations, however, we must remember that with any kind of change, planned or unplanned, growth doesn’t happen overnight. Therefore, keeping sight beyond this crisis is vital for businesses to not only survive but to emerge stronger and with a renewed vision.

The right responses are dependent on the specific circumstances you and your business face. However, when experiencing significant stress or distress, we recommend you center the majority of your actions on the management of your financial position and liquidity.

We have developed a set of guidelines that all businesses can follow: The Resilience Wheel is designed to outline those critical areas in a business that need to be studied and addressed at times of crisis.

In addition, we look at the challenges the markets present as well as the issues organisations and investors need to address as a result. We identify ways in which companies can tackle issues internally, including cash flow and working capital management, scenario planning capturing a pre and post COVID-19 impact on EBITDA and value, and debt negotiation strategies. Further and in relation to the stakeholders, we propose amicable solutions such as material adverse provisions as well as conducting periodic transparent communications with investors.

Reach out to Salmaan Khawaja, Partner of M&A and Transactions and to Neha Julka, Associate Director of M&A and Transactions, for more information.