As the economic effects of COVID-19 continue, many private companies are starting to consider selling their business to a corporate or private equity (PE) buyer. But buyers have become more sophisticated in their due diligence; the pre-COVID-19 metrics no longer apply. And that is forcing many private companies to rethink the way they position themselves for a sale.
In this edition of Privately Speaking, we look at some of the new approaches buyers are taking to value assets in the new environment. And we offer some advice to help sellers ensure they are getting the best deal possible, regardless of their reasons for selling.
It is hard to determine how the recovery from COVID-19 will play out or how long and deep the recession will be. We do know that M&A will revive and, if the last recession is a guide, the top investors will be looking for opportunities to generate outsized returns. But with so much uncertainty, they are going to be smart about where they put their money. Due diligence is becoming much more sophisticated.
– Conor Moore, National Leader, KPMG Private Enterprise, KPMG LLP
Were you considering an exit sometime in 2020 or 2021? If so, things have become infinitely more complicated. Initial public offering (IPO) markets are essentially closed. Strategic mergers and acquisitions (M&A) activity has slowed. PEs have turned their attention to shoring up their portfolio companies.
Yet, as the shutdown begins to loosen, many investors—PE and strategic investors in particular—are starting to look for value opportunities. They recognize that, during the last recession, the savviest investors markedly outperformed their peers. And nobody wants to miss out on strong assets at bargain prices.
Sellers that demonstrate a nuanced understanding of the landscape, drivers of performance, upside scenarios, operating capabilities, and a roadmap to increased value—all supported by both internal company and external market data—can go on the offensive, pre-empting buy-side probes and building confidence in the deal process.
– Sal Melilli, National Audit Leader, KPMG Private Enterprise, KPMG LLP
Privately Speaking Series
Privately Speaking tackles the issues that privately-held entities, including private equity- and venture capital-backed companies, care about most. In each edition, we share insights, as well as practical, actionable tips to help boards and executive management grow, strengthen, and transition their privately-held businesses.
Whether your company is starting out and growing or strengthening and transitioning, this series promises to explore ways to help companies be successful at any stage of the business lifecycle.
