How Does COVID-19 Affect Selling My Business?

Due to the current public health crises and stock market volatility, things have changed since late 2019 and early 2020 when Sellers seemingly across all industries in the M&A market enjoyed record high EBITDA multiple sale prices.  If you didn’t sell your company during the last market apex, you may’ve asked yourself “Is it too late, did I miss the boat” and, “Is now still a good time to sell my company?”

Some factors to consider when thinking about selling your business during the COVID-19 pandemic (however long it lasts) include:

• Number and Type of Potential Buyers
  • Given the lessons many companies learned the first time around and concern about a second wave, many companies are in “wait and see” mode before committing to outlay any funds on acquisitions.
  • This may limit the number of strategic buyers (e.g. industry competitors) willing to submit a bid who are being cautious to conserve capital to withstand another downturn.
  • Offers from financial players (e.g. private equity) may become more prevalent due to their need to deploy fund capital in a given time frame.

• Sale price
  • Since sale price is usually a function of Buyer competition and Seller leverage, with fewer Buyers in the market demand may be down and probably also EBITDA multiples and sale prices.

• Your Bandwidth & Due Diligence
  • Do you have the time/energy to focus on selling your company? Are you too busy just trying to make ends meet, or because you can’t keep up with the number of new orders flooding in?
  • Having a core team in place who you can delegate to for a Buyer’s due diligence requests will allow you to continue running your company so sales remain strong.
  • With the stopping and starting of various state and local restrictions, you and your employees’ ability to access due diligence materials may also be impacted to the extent you aren’t able to access information remotely.

• Timing
  • Buyers will likely scrutinize how your company and its sales were and continue to be affected by the COVID-19 disruption. If your business has been fortunate to either maintain sales or even grow, your industry as a whole is likely less impacted by the general decline in demand.

If you’re considering selling your business and have questions, please call one of Graydon’s business team members to help you navigate the new M&A landscape created by the pandemic.

*The issues above are meant as a high level summary of complex and evolving topics and should not be construed as legal advice