Just like the experts say about the stock market, there is no ideal time or magic wand to determine when to jump in. At this time, it is difficult to determine the long-term winners and losers from the COVID-19 pandemic. In the short term, certain businesses in healthcare, medical delivery, home delivery, retail food, outdoor maintenance (e.g. landscaping), and others are thriving. But what will the long-term portend?
The following are observations of the current market in May of 2020:
- As always, good and growing companies are selling at solid multiples.
- Private equity (PE) and strategic buyers are looking for good companies facing setbacks from the pandemic, even to the extend they may be considered distressed.
- Deals which are early in the "go to market" process are delayed for a number of reasons – difficulty doing diligence; getting updated financials; response times; verifying market conditions; the "great" unknown of when the pandemic will end, etc.
- Buyers are using the uncertainty to depress multiples and reassess adjustments to EBITDA.
- Lenders are very difficult to have their teams get and stay focused.
- The logistics for both buyers and sellers and their advisors is difficult at best.
- Parties to a deal are more frazzled, even though they have more time to concentrate on the process. Small unresolved issues become more acute and difficult.
- Sellers are feeling less confident and less in control of their operations, let alone the process.