PODCAST: How the pandemic has impacted M&A

Written on Oct 01, 2020

By Jessica Salerno, OSCPA senior content manager 

From customer relationships to the supply chain, COVID-19 has muddled the mergers and acquisitions market. 

“We've been seeing a lot of temporary disruptions, such as declines in discretionary spending, supply chain restrictions on travel, the availability of international workers and exchange rate fluctuations,” said Cheryl Aschenbrener, CPA, national leader and partner in transaction advisory services at Sikich LLP. “And then on the permanent side, we're looking at business model changes or technology changes with the work from home capabilities and the costs associated with that.” 

Lady smiling for camera.

Aschenbrener joined The State of Business podcast this week to discuss how the M&A market has adjusted to the pandemic. 

She said as entrepreneurs and owners look to sell their businesses, they might have to adjust expectations about price and consider extending timelines. Aschenbrener said she also anticipates a larger portion of the purchase price being paid in earnouts or rollover equity because the valuations are going to be based more on future results. 

The key for many companies to be attractive to buyers will be showcasing a path to recovery, she said. 

“It's no longer just laying out a five-year plan, I think we've all realized it's now looking into 6, 12, 18 months from now,” she said. “Showing structuring and updates to that change in their working or operating capital and then showcasing the connections to their customers and that supply chain.” 

Aschenbrener noted there is considerable employee fatigue, so companies need to show how employees have remained engaged and involved, so potential buyers don’t see a tired, burnt-out workforce. 

Companies can gain an edge if they consider how to meet in person with potential buyers safely, she said, because most meetings are now happening virtually the face-to-face experience can make the difference. 

“The deal flow is coming,” Aschenbrener said. “And it's going to go fast. So, I think people being prepared when they put their company out for sale is going to be huge.”