It is clear that the next few months will be a new business environment for us all and we thought it could be helpful to pass on trends we are seeing in M&A and capital raising around the world to inform your planning as this environment unfolds.
We have received many questions this week from clients and potential clients asking about how the current environment is impacting M&A and capital raising and so I thought I would share four key insights from our global pipeline meeting this week. Our pipeline includes over 20 people from across seven countries.
Impact of Covid-19 on M&A and Capital Raising
- Corporate or strategic buyers are putting things on hold for a few weeks while they consider their options. We suspect this is driven by their own need to check their businesses before considering external investments. Having said that these buyers have not withdrawn from transactions or DD, just paused it. This is especially common in engineering services and IT services where client demand remains strong. In fact, engineering companies are still briefing us on their buy-side requirements.
- PE buyers and investors are still keen to move ahead and are keen to make investments. PE are even changing earn-out components of deals to fit this new environment. For example, KPIs on earn-outs are being pushed out an additional 12 months to give sellers a better chance of meeting the targets and the basis of the KPIs is also changing from EBITDA to measure like pipeline. The key is PE are still looking for good businesses to buy.
- Non-bank US debt providers are still looking to loan to US, Canadian and Asia Pacific companies. Certainly, some of the more traditional banks are stopping but there are many other debt providers that are transacting. The feeling is the DD process may take longer but debt from $15m to $500m is available and may be attractive to businesses looking to bolster their cash reserves.
- PE and some corporate clients are interested in testing the market to sell non-core business assets to strengthen their reserves and focus on their core. These clients are seeking to move quickly and so the transaction process is being streamlined.