Deal-Making During The Covid Era
This week, let’s talk about deal-driven growth and Covid! In the past on the show we’ve talked about some of the opportunities that arise during challenging times. We’ve also discussed things to watch out for! Now that we’re over six months into this pandemic, let’s talk specifically about deal-making during the Covid era.
Hard to Compare
First off, it’s hard to compare Covid with any other time in history. For one thing, there’s a dichotomy between industries that are doing incredibly well, and others that are failing and faltering. There are major questions about when things will turn around or come back. In addition, we’re all getting used to a “new normal”.
In the M&A market, in terms of bigger deals, most surveys have shown the market to be down about 30% in terms of deal volume. However, there are some exceptions. Transportation, food, and agriculture have started to come back up. In April/May most industries experienced a significant dip. But there has been a rebound in certain industries. On last week’s episode, David DeVoe noted that in the wealth management space there is a surge right now. As the stock market comes back up, deals continue to increase as well.
Honestly, 2020 has been a huge mixed bag. Technology, home exercise, delivery, and some others are seeing huge gains. As a result, they may be able to absorb some competitors or make other deals, while in verticals that are suffering, we are seeing fewer deals.
Deal-Making Isn’t Going Away
What I see is this: people are still optimistic about deals. There is capital available out there, and people don’t see the impact of Covid as a permanent situation. Deal-making isn’t going away, and there is an expectation that many industries will continue to grow, expand, and find ways to innovate.
Now, I recognize that there are many businesses, especially restaurants, gyms, and some retailers, that have gone bankrupt. However, even within that we’ll see reorganizations and reopenings, with many companies coming out with cleaner balance sheets and ready to do deals.
Deal-making will continue, even as it may be done in new, creative ways we haven’t seen before. Even industries that are being hit hard now may find that they are better positioned for deal-making in the upcoming months than they ever have been before.
Creative Deal-Making Lessons and The Voice
There have also been someone-off, strange deals that have been fun to see. For example, I enjoy The Voice, and midway through last season they ended up going virtual. Honestly, it was clunky. Everyone was singing and judging from home, and there was no real audience.
This season, however, they’ve adjusted. They wanted to have the singers, hosts, and judges live, but also keep everyone safe. They created a “bubble” by renting out a Las Vegas hotel. This benefited the TV show, and I am sure also the hotel, which would have had decreased occupancy with Covid issues. The audience is shown on virtual screens to provide a greater sense of live engagement as well.
Now “The Voice bubble” is part of coming on the show, and enables quarantining and Covid safety measures that would be impossible with the old set up.
Sporting stadiums have also been working on creating bubbles and providing safe spaces for action! If you have real estate or a business with underutilized space, this is a great time to think about how you can use it creatively to engage in deal-making during the Covid era. How can you apply creativity to your business?
Back on Episode 25, Damon Gersh shared about the “choke point”. During 9/11 he controlled tons of contracts by locking up labor, which created opportunity. How can you create something similar in your business?
Covid Era Stats
In our law firm, we’re seeing the stats play out in the deals we’re making. Companies used to working and delivering results virtually are thriving overall. There is a lot of deal activity in that space! Financial services deals are very strong. As these are two significant industry segments for us, we have kept very busy.
Once you get into recession and values go down, there usually really are a lot of deal-making opportunities taking advantage of that downturn. So far, however, I haven’t seen much of that happening during Covid. Often, that stage happens 1-2 years into a recession, so it might still be headed our ways. However, we’re not in an across the board recession by any means at this time. This may still be somewhat temporary, in terms of overall impact. We just don’t know the full fall out yet.
As businesses adjust, people become more willing to get out there, and the government decreases their regulations as cases, hopefully, decrease over time, we may see an upward trend before we go too much deeper.
Of course some industries, like airlines and restaurants, may see much more long term impacts than some others. Bottom line, though: We’re not seeing mass scale fire sale deals yet!
Although those with capital may be a bit slower or more picky, the money certainly hasn’t dried up! About 88% of deals in M&A are strategic buyers, and during this time that makes sense. Shoring up your strengths and relationships are great things to focus on right now. The synergies that strategic buying creates are even more important in challenging times.
What Trends Have Impacted You?
I’d love to hear your experience within your own industry. What trends are you seeing? How have you been impacted? I’d love to connect with you on LinkedIn or Twitter and get a read on what you’re experiencing. You’re also invited to our monthly Deal Den calls, where we dive deeper to discuss specific challenges, opportunities and needs during this trying time.
To learn more about deal-making during the Covid era, listen in to the full show!
Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
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