COVID-19 has impacted every aspect of business, and that’s especially true when it comes to selling one. If you’re considering selling your company, the experts at Polsinelli can provide guidance on what to expect, pitfalls to avoid and steps to ensure you get the outcome you deserve.
The COVID-19 pandemic has affected materially and adversely almost every aspect of our lives, including business and related merger and acquisition, or M&A, activity. Nevertheless, M&A transactions are still efficiently being accomplished – for both buyers and sellers – with appropriate advanced planning and utilization of experienced legal and other advisors.
Engaging advisors with significant experience and accumulated wisdom in completing M&A transactions during this pandemic should be your first step taken towards ensuring a completed deal. Sage advisors can help transactions stay on course, can identify creative structuring alternatives that might not otherwise be obvious to preserve transaction value, and can act as transaction facilitators to increase the probability of deal success.
There are a number of modified and other preplanning steps that should be considered during the pandemic to move your M&A process forward, including with respect to the following transaction steps.
Due Diligence – The COVID-19 pandemic has resulted in restricted travel, fewer hours in the office, disrupted working day periods, and limited opportunities to meet face-to-face in three dimensions. These work-routine changes can make learning about the intricacies of a transaction party more difficult. Early consideration of some pandemic related due diligence issues that may be expected to arise can be important.
Valuation – The COVID-19 pandemic has reduced the productivity of many businesses, which can create valuation difficulties. In such instances, there are structuring and consideration form alternatives that may be employed to bridge valuation gaps perceived between buyers and sellers.
Structuring – Depending on a company’s industry and regulatory environment, and its sensitivity generally to COVID-19 related issues, transactions that may have otherwise been structured as mergers, stock, or asset acquisitions may now be better accomplished through recapitalizations or joint venture arrangements, and in multiple steps rather than as single-closing full buyouts.
Transaction Certainty – While the COVID-19 pandemic generally created only uncertainty, the M&A bar has moved towards more certainty in creating and retaining deal value. For example, transaction parties are more frequently turning to representation and warranty insurance to backstop claims for indemnification based on breaches of representations and warranties. While the insurance retention and negotiated deductible, and the insurance underwriting due diligence process, can increase transaction costs, parties are more frequently willing to pay up-front for certainty on the backend at recovery, in the case of a buyer, and purchase price protection, in the case of the seller.
As Gabriel García Márquez observed in Love in the Time of Cholera, “Wisdom comes to us when it can no longer do any good.” During a pandemic is not the time to seek to learn the intricacies of M&A, and post-closing with 20/20 hindsight is not the time to realize that a better bargain could have been negotiated. Engage experienced advisors early in the process to ensure that they can apply timely their wisdom to your transaction’s particular issues and help you get the deal you deserve.
ABOUT POLSINELLI
Polsinelli attorneys in our Mergers, Acquisitions and Divestitures practice appreciate that every deal is unique, and at the beginning of each transaction we make sure to recognize our clients’ objectives. Spanning multiple industries, our attorneys complete transactions for private and public companies, big and small, working collaboratively with in-house personnel and coordinating efforts with clients’ other advisors, like investment bankers and accounting firms, to provide high-caliber, integrated legal advice covering all areas needed for a seamless negotiation and closing process. By taking the time to understand the economic and value-related consequences singular to our clients’ business transactions, our practice works to protect interests and lead in the navigation of a full range of deal options.
Contributing Attorneys:
Scott Berdan
Michael Dolan
Brian Furgason
Darren Hensley
Christopher Reiss
(This sponsored content was provided by Polsinelli)