Like many other business transactions during the coronavirus pandemic, mergers and acquisitions (M&As) have been impacted by the need to cut back on operational spend with executives looking internally at the health of their own organizations. There’s no denying that it’s been a tough year for growth and expansion. According to a Harvard Business Review survey earlier in the year, more than half of respondents (51%) said they were looking at a “temporary pause” of deal activity to review how long recovery might take.
But the picture isn’t entirely gloomy. Out of the shift from our physical world to a remote one, and at times locked down one, is that we’ve seen a greater further focus on digital to enable life to continue as much as possible. Digital agencies have been needed this year more than ever to guide businesses through their digital journeys as they look to accelerate their transformation plans. As a result, many have pursued plans for expansion; a recent PwC COVID-19 survey of more than 900 global CFOs showed M&A will feature in companies’ recovery strategies.
But M&As are never simple and the nuts and bolts have been made even more complicated by the pandemic. Deal terms have been influenced, and, due diligence processes extended, all through abundant caution from potential investors. This has also been further complicated by stakeholders now mainly working remotely as deals have had to be done from our kitchen tables over Zoom.
To those looking to sell, it’s not as simple as putting up a for sale sign and waiting for the offers to roll in. As this year has taught me, it’s a long and emotional business journey that requires a lot of patience, planning and attention, whether you’re in a pandemic or not.
So, what should potential vendors consider when looking to hand over their equity and, more than likely, control of their business?
Are You Ready?
The fundamental question you should ask yourself is: Are you and your business ready to sell? And it’s crucial that the answer is honest. Ensuring that your business is performing well, your financial projections are strong, and you have a good track record to back it up is essential. Covid has certainly complicated that for many agencies but it’s important that your business fundamentals are robust when considering selling.
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As the vendor(s), this should be part of a very clear picture of what you want to achieve. Know what type of transaction you are after, whether it be investment, management buy-out or trade-sell, and have a clear strategy about the value add it will be providing any would-be acquirer. It’s also important to think about this in the context of your own on-going involvement (or not). Sure, it’s great to have a vision but it can only be realized if you have buy-in from a management team who will need to stick around, especially if you want to reduce the hours you are putting in or even leave the business. Selling is an all-consuming process and so having a strong team around you to help and take things forward with the new owners is critical.
Once those questions have been answered and it’s the right decision for you and your business, it’s time to call in the professionals. Having an M&A advisor backed up by other professional services such as legal and tax advice is essential. They will always ensure your best interests and are the glue throughout the entire process, especially when guiding you through any potential pitfalls in the process. It’s worth pointing out that if you think you are ready, but your advisors don’t think that you are, they can often help you get to the point where you are ready to go.
Be Patient
The process of selling your company won’t happen overnight. For those entering new deals right now, your timelines are likely to be extended across the entire transaction. Negotiations may take longer; due diligence issues will be more thorough, and buyers are likely to be much more hesitant around valuations with possibly more stringent finance conditions in this current climate.
The due diligence process is an intense one and is now more intense than ever with the COVID casting a shadow. Bringing on board professionals will make navigating the processes easier, allowing you and your management team to continue focusing on the business as much as possible. But in the game of negotiation, they also play the key role of knowing and telling you when it’s time to walk away.
Patience really is a virtue here but there are also benefits to a longer process. The COVID-19 has given businesses extra time to prepare for integration. Transactions that may have happened relatively quickly over a few months may now take several. This can present the opportunity to work on preparing your teams and business structures to come together. If you’ve begun the process correctly with succession plans having been built-in, you will be well on your way to hitting the ground running when the deal is signed.
Read More: COVID-19 Disruptions: Can Digital Transformation Help?
Communicate Clearly
Once the deal is done, it won’t be news to you! But it certainly will be for many of your employees and clients. Having a strong communications strategy should be a top priority to ensure that the right message is shared, and anxiety is reduced amongst staff. It lets everyone involved know what is taking place in the bigger scheme of the organization, creating that all-important business trust. This anxiety may be shared by your clients.
Again, this should not be an afterthought and a well-considered stakeholder management plan will ensure the benefits and opportunities that any change of control brings are landed proactively.
But it’s not just about creating a seamless and transparent process- it’s about bringing your employees and stakeholders along with you towards your future vision in the long-term. Helping them to understand the reasons behind the move and why they are important for going forwards. This will go a long way in retaining talent and building enthusiasm.
Selling is complex, exhausting and at times an emotional process that needs to be entered into carefully with the right advice and guidance. But, with the digital market picking up again, it’s also exciting to see the opportunities for growth across the sector. There are a lot of interesting mandates out there with the agency space undergoing some consolidation. There are potentially some great acquisitions to be had and so, I’m excited to see what is around the corner.
