Weathering the storm of COVID-19 during an active merger or acquisition

Given the current climate, it’s no surprise that merger, acquisition, and divestiture (MAD) activity, like most other non-essential activity, has come to a grinding halt. In fact, a recent Forbes article highlighted that ‘by the end of March 2020 (MAD activity) had reached a near standstill. M&A levels in the United States fell by more than 50% in the first quarter to $253 billion compared to 2019, but most of those transactions were entered into or closed earlier in the quarter before the crisis spread worldwide.’ 

As part of this global pause, many pending activities have been terminated as organizations are forced to redirect their attention, and their funds, to operational challenges brought upon by the pandemic. For the deals going ahead, factors such as deal terms, due diligence, availability, pricing, and deal financing will inevitably be impacted, as normal processes adapt. For example, crucial due diligence activities like spending time with senior management and key employees are rendered totally impossible as everyone is working remotely, and offices remain shut. 

Like many other areas of the economy, MAD activity will not be put on hiatus indefinitely, and there are still opportunities present and deals pushing ahead. In this ‘new normal’, many organizations with closed, or ‘set to close’ deals will be looking to see how to proceed, and potentially innovate to side-step some of the complications that Covid-19 has placed in their way. 

So what are some of the key challenges for organizations kick-starting MAD deals today?

  1. A common delay or obstruction for MAD activity is the ability to ‘get everyone in the room’, meaning gathering all key stakeholders required to make a decision. Of course, right now, this prior challenge is compounded. Virtual conferencing tools like Zoom or Microsoft Teams can be used as a substitute, and have the benefit of bringing together individuals in disparate locations, who may have struggled to attend face to face meetings. Whether this approach delivers efficiencies or causes delays - as people feel their visibility, or ability to communicate is compromised, is yet to be seen in many cases. 
  2. Extended timelines are guaranteed across the entire process, with the US Department of Justice requesting that firms add 30 days to their ‘deal timing agreements’ for M&A activity. As regulatory bodies and antitrust agencies adapt from traditional processing, such as filing papers to operating remotely, there are simply going to be delays. It’s better to accept this fact upfront, and try to include realistic projections for each and every potential delay in your planning. Ensure that any activities or workstreams that can be executed concurrently are, and identify any (likely rare) areas with little to no dependencies and try to be inventive with ways to accelerate them further. This demand for an innovative outlook is also emphasized in the Forbes piece, ‘With all of the principal players working remotely, the effective use of new and creative collaborative tools, technologies and techniques have become more critical’. Necessity is the mother of invention - so put it to work where you can.  
  3. While this is a constant theme throughout the challenges we’ve explored, it is prominent and far-reaching enough to deserve its own space. Remote working is the global norm right now, the scale of which is entirely unchartered. Outlining, gathering, and mobilizing remote teams for an event as intricate and highly dependent as a merger, acquisition, or divestiture is a huge undertaking. With complex resource needs and detailed multi work-stream management being the default for MAD activity, it’s understandable that organizations might be reluctant to see this played out remotely. Without the on-site war rooms, team sync-ups, progress updates, what does collaboration look like? That’s not to mention all the micro communications doled out in nudges to a desk neighbor, or held in a brief stroll over to a desk for a ‘quick question’. It’s not just enough to take the communication online and expect to see efficient collaboration, especially when you’re dealing with workstreams where action B and C are owned by Team X, and triggered by the completion of A, owned by Person Y. The workflow needs to be built and replicated virtually too, static documents just aren’t going to cut it, especially when people are unable to huddle around them. 

As we move from the eye of the storm, into the landscape left behind in its wake, it is universally true that no business will be entirely unchanged, although the level of adaptation required will vary. While the climate for MAD activity is more challenging than ever, there will inevitably be movement in the market, favoring resilient buyers and featuring, unfortunately, desperate sellers. When it comes to communication, collaboration, and workflow management there is the opportunity to rewrite (some) of the rules and deploy innovative techniques to cross the remote team chasm, and push through in a highly adverse climate. This series on mergers, acquisitions, and divestitures will continue to track the ongoing impact on this industry, relevant news, as well as exploring pitfalls to avoid, and emerging opportunities and technologies to alleviate key challenges. 

 

Cutover is a market-leading work orchestration and observability platform providing remote team orchestration that allows our clients to remain in control of critical events and effectively communicate and collaborate remotely. Offering the ability to rehearse and refine workflows, with full visibility into processes, and a comprehensive audit trail, both teams and stakeholders are able better understand progress during even the most complex events. 

Download our case study to find out how we supported the successful execution of a major hotel merger.

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