Post-COVID Due Diligence

No one knows for sure how much longer the COVID-19 pandemic will be affecting our lives and our businesses. But we do know that mergers and acquisitions are still happening, deal activity will pick up, and the way we approach due diligence in a post-COVID world has the power to make major differences when it comes to selling a company. While there are new obstacles to consider, there are also significant opportunities to identify and create value, and help companies outperform the market.

Real-time Data

One aspect that we need to look at during these times is real-time market data. We can’t know for sure what is going to happen in the next year or so. This is why fully understanding the current happenings in the market right now are key to positioning an asset. These real-time insights include how well a business has pivoted in order to adapt during the pandemic versus its competition, how it has addressed digital capabilities, and what a recovery might look like in that sector. When we have a full understanding of current environments, we can better anticipate changes or disruptions within markets and sectors. This includes the studying of every possible data stream that pertains to a company.

Digitalization

COVID-19 has accelerated digitalization for all types of businesses. Retailers have had to focus on e-commerce versus brick and mortar stores. Most companies have switched to remote workforces and digital relationships with clients and customers. Due diligence has always looked closely at areas such as data centers, system architectures, and cybersecurity. The pandemic has made it more important than ever to account for how well technology is supporting the company in a more digital world. A business’s digital strategy has come more to the forefront as a differentiating factor and how it enables revenue, which can boost a company valuation.

Customer and Suppliers

Another aspect of due diligence that is important during these times is the assessment of a business’s customers and suppliers in order to quantify risk. How stable have they been through the pandemic? How confident can we be about cash flow? What changes have taken place and how have they affected the financial strength of the company on a transactional level? There needs to be a deep dive into several different areas, such as inventory management, supplier payments, logistics, customer growth, pricing power, channel mix, and pipeline strength. By identifying strengths and weaknesses in these areas, businesses going to market will know what to improve and how to improve it, which in turn will improve the valuation.   

Distressed Assets   

In a post-COVID environment, more distressed assets will be coming to market, and buyers will be more scrutinizing in examining a company’s performance. M&A transactions involving these companies will require particularly tedious due diligence in order to succeed and preserve value. A clear plan will be crucial to ensuring that value is created and not lost where possible, to avoid surprises along the way, and to boost buyer confidence in the deal.

Ready to Sell?

If you are thinking about selling your business, our M&A experts at Benchmark International can be the game changer you need in selling for maximum value.

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