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Are deals getting done in lock-down?

In April last year, the biggest question facing anybody wanting to buy or sell a business was: are deals still getting done?

The global financial markets had hit a low point on March 23rd (which happens to be my birthday), down 38%. The emerging pandemic was looming large over us all, and business owners everywhere were bracing themselves for what was to come: disruption, and maybe even ruin or worse!

Things not going as bad as we first thought

Since then, we have seen a significant rally in global markets. Not many saw that coming in March 2020, including me. There has been unprecedented and swift government stimulus, which no doubt saved many, many jobs, and frankly remarkable levels of resilience in the economy. It’s not all good, I grant you, with significant loss of life globally and a lot of hardship and disruption, but nowhere near at the levels being contemplated at the start.

Unemployment is now c6.8% (5.3% pre-Covid) whereas the government’s own predictions in Australia not that long ago were over 9%. GDP is up to over 3.3% in the last quarter in Australia, a quarterly increase not seen since 1976.

Many businesses have suffered; hospitality, tourism and the airlines to name just three, while at the same time many have found a way to navigate the new environment. Some have even prospered.

So, are deals getting done in lock-down? 

So back to the original question, are deals getting done in lock down? The simple answer is yes – we just completed one this month. Our client was a Victorian-based manufacturer of outdoor heating and high-tech barbeques called Thermofilm. The company was acquired by a private global conglomerate based in Dublin called Glen Dimplex.

Deal terms were negotiated pre-Covid, but it was deferred for three months in March 2020 pending the wash-up for both parties in the April-to-June trading period. All things considered, both parties had traded reasonably, and due diligence commenced in July 2020. A long and protracted due diligence exercise began via a data room and extensive use of Zoom. The exercise nearly doubled in time from a more typical three months to over six months. We are not entirely sure that this extension was entirely down to Covid, but it certainly didn’t help. In our line of work, it’s never over till the fat lady sings, and she didn’t complete her part until 1:15am local time on Saturday 21st December when binding agreements were finally executed.

Lock-down made it difficult but not impossible

Remarkably, both Dublin and Melbourne were in lock-down for a significant part of this due diligence period, and yet everything moved forward slowly but relentlessly until the job was done.

Our client displayed great stamina, fortitude and intelligence and stayed cool at the key moments.

This deal got done because the two-businesses fitted together well – the strategic drivers identified early in our negotiations remained intact despite Covid.

Our client’s business traded well through the months leading up until completion – benefiting from the hardware and DIY retail boost. The fundamental synergies – especially the international sales and marketing opportunities post-merger – supported the deal through the more intense stages of the contract negotiations. Most importantly, common sense prevailed at each stage and the owners now have certainty about their futures and they are delighted with a great outcome.

Is this a one-off? No. During the same period we have agreed terms with four sets of parties; two have commenced due diligence and we are currently finalising terms on the other two. We are also seeing strong interest in other assets we are representing in food, technology, transport and manufacturing. Furthermore, we are observing unprecedented appetite by private equity to acquire private businesses in Australia. 

So is now a good time to sell my business?

If your business has an enduring model capable of delivering results over time, and the opportunity can be articulated intelligently to a genuine, strategically motivated, and appropriately qualified acquirer, then absolutely. Yes.

So is now a good time to buy a business?

If you are a genuine strategic acquirer and have identified what you are looking for and why you need to acquire and expect to pay a fair price for a quality asset that fits that criteria, then absolutely. Yes. Give us a call even.  However, if you are an opportunistic acquirer prone to bottom-feeding and looking for some poor unfortunate soul down on his luck then don’t call us; we are probably your worst nightmare and won’t even discuss what we are representing. Especially if you tell us you will look at anything!

What does 2021 hold? I think we’ll leave that for another blog!

Good luck with your own plans and stay safe.

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