As of mid-March, there is much uncertainty surrounding the impact of the coronavirus on U.S. (and global) business. Many Americans are gripped by a "fear of the unknown," since there is no viable cure on the horizon.
What is the fallout for M&A activity? We suggest to our clients (buyers and sellers) that they document, as well as possible, the effects now and for the next 6-9 months. Questions needing answers are the following:
- Has the supply chain for your products/services altered your ability to deliver to your customers on a timely basis?
- Will your margins be affected either positively or negatively?
- Are you reassuring your clients/customers that their concerns are your concerns, and specifically how your business is reacting to resolve any issues?
- Have any key employees been infected and quarantined, and how is that overcome?
- Have you taken actions to move your manufacturing out of China or "affected regions/countries?"
- Do you foresee any lasting impacts that will alter the way you conduct business?
Probably the biggest result of the spread of the virus is the reduced ability of business owners to take decisive actions. In some cases, this malaise has deterred seller prospects from "going to market." And, the analysis of EBITDA adjustments may well need to reflect your answers to the above questions. Document the real or potential damages to sustained growth and profits. Remember, for every setback or downturn, there are opportunities or doors opening on the other side. Find them and thrive.