The humanitarian and economic impacts of the novel coronavirus are truly stunning. Leaders must act now to ensure resilience. That includes business leaders, who must balance risk and liquidity, all while looking for potential growth opportunities.
The M&A market has contracted significantly. Deal volume during the first quarter of 2020 dropped to a seven-year low, with valuations down 33 percent compared to 2019. Recessions happen, but this downturn is no ordinary slow down. We can expect fundamental changes in supply chains, consumer behavior, and market psychology. Some shifts may only last a short while, but others may linger. We don’t know which is which, or how long it will be until we return to normal—whatever normal might be after all of this.
The future viability of every company depends on swift, decisive actions that will shift by geography and sector, with each area affected slightly differently. Some sectors may even thrive. Leaders can position themselves now to maneuver their way through trying times and outperform the underprepared. Readiness is the key to resilience. Here are some tips for weathering the storm:
- Position your company now. The immediate future is critical for making short-term maneuvers that promote resilience and stability.
- Gain an understanding of how the crisis has changed your company’s positioning. Identify critical points of risk, find ways to promote liquidity, and assess whether partners are struggling. Identify the maneuvers that could help you tackle these challenges.
- Make M&A decisions. Look at the in-flight deal funnel to decide what you should pause, what should be reprioritized, and what activities should cease altogether.
- Look for opportunistic plays with long-term potential. Re-evaluate the investment strategy for deals already in the pipeline. Look for chances to bet on assets such as IP, talent, distressed platforms, and insolvent startups.
- Prioritize accelerating out of the downturn. Crisis economics will continue to unfold for months. Intelligent moves can help your company escape the downturn more quickly.
- Don’t just look to the horizon. It’s easy to focus on the immediate term, but you need to be proactive. Look how industry structure may evolve in response to the crisis. Look for consolidation and convergence opportunities.
- Reshape your M&A agenda for the short-term future, and consider taking action early where appropriate.
- Adopt a broader view of M&A. Consider how mergers in other sectors might influence your business. Industry structures will inevitably evolve.
- Assess whether consolidation is in the future. Look at how potential transactions might influence your business—and how you might influence those transactions. Consolidation and vertical integration are not right for every business, but you still must assess how these factors could influence the future.
- Prioritize strong alliances.
- Don’t just stick with your priorities because they’re there. Continually revisit these priorities in light of new information. Look for potential risks and disruptions, while also evaluating new possibilities.
- Get expert insight. No company can navigate this all alone. A skilled M&A advisor can help you plan for the future while managing the deals of the present.
About Madison Street Capital
Madison Street Capital is an international investment banking firm committed to integrity, excellence, leadership and service in delivering corporate financial advisory services to publicly and privately held businesses. Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner.
Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.