The Nuances of the Deal in the COVID-19 World

As we highlighted in “M&A Learnings From Past Economic Disruptions,” there is a strong correlation between the performance of the economy and M&A activity. Indeed, starting in the first quarter of 2020, we saw many M&A transactions pause as the global economy stalled in response to COVID-19.

In “Looking Back to Go Forward,” we dove into the types of companies and deal characteristics that found success in the Great Recession and the following months. As described in that piece, during the recovery, certain types of transactions found traction more quickly than others. And, of course, different approaches were required to bring those deals to fruition.

Here, we distill our most recent experience from transactions the firm has completed since the onset of the COVID-19 crisis into four observations for conducting M&A in this challenging landscape. All of these observations center on transparency, collaboration and flexibility. While clear communication and the willingness to adjust as a deal progresses are long-term hallmarks of how Harris Williams works with clients, they are more critical than ever before.

1. Realism and Transparency

After a 10-year run of a record-setting M&A market, there are countless examples of transactions in which values, deal terms and speed to close exceeded expectations. In the current environment, hoping to achieve the outlier outcome is less realistic. The buyer universe may be more limited in terms of number of parties interested and types of buyers (corporate, private equity, patient capital, SPACs, etc.), and sellers may need to consider options such as minority investments or more structured deals.

Given rapidly changing conditions, sellers will also be working with buyers who have a greater need for real-time information. Buyers have more questions on a wide range of topics, including the resilience of the target through previous cycles, the short- and long-term pipeline of opportunities and, of course, the impacts of COVID-19 on the business. “During the sale of SuperOffice, which occurred during the middle of the COVID-19 crisis, buyers were analyzing daily bookings and pipeline evolution, assessing the company’s ability to attract and retain customers,” says London-based Managing Director Thierry Monjauze. 

The information supplied to buyers must be firmly grounded in realistic projections. In an environment characterized by more scrutiny, companies should only present plans they can deliver confidently in front of buyers. Including scenarios showing the potential impacts of COVID-19 on the business, as well as concrete solutions to such challenges, can be helpful to buyers. Sellers should also understand how the company could adjust its cost base to manage a reduction in revenue. It is important to not over-engineer their adjustments—buyers and lenders will focus a critical eye on COVID-19-related adjustments. 

Given all of these considerations, sellers can benefit from thoughtful advice, says Managing Director Mike Wilkins: “Compared to a few months ago, we are more strongly encouraging our sell-side clients to do third-party work, such as vendor due diligence, quality-of-earnings, market studies, IT assessments and environmental studies before starting the transaction.”

“The more this work is organized and addressed on the front end of the process, the smoother the interactions will go on the back end,” reiterates Monjauze.

2. A Technology-Forward Mentality

Given the impact COVID-19 has had on travel and face-to-face meetings, video-based interactions have quickly become the new norm. While video communication technology has its challenges, and bandwidth issues still occur, we are spending more time coaching our clients on how to engage more effectively in virtual settings. Instead of conference calls, we are advising our clients to use video meetings when possible to make interactions more personal, especially when key decision-makers are involved.

To be sure, with today’s technology, many aspects of an M&A transaction can be done remotely. As comfort levels rise, we expect the need for in-person interaction to decline—particularly in cases where buyers and sellers already have an existing relationship. In other cases, there will still be the need for buyers and sellers to meet face-to-face before closing a deal.

“When we advised Kalkomey, we worked with the management team to craft an engaging company video we planned to use with potential buyers in advance of a sale process,” said Wilkins. “This type of video helps CEOs make their messages more personal and allows prospective buyers to get a sense of company culture, which is an important aspect of any deal.”

“While we’ve been sharing data electronically for years, what is new is the fully virtual way we are conducting diligence sessions with management and third parties regarding this information. While this used to happen in person, it’s now occurring on video,” says Bob Baltimore, a managing director and co-head of M&A at Harris Williams. “We’re also now holding management visits, follow-up meetings and other discussions over video. Not having the opportunity for buyers and sellers to connect face-to-face, look each other in the eye, and shake hands is something we are carefully tackling in all of our engagements.”

While technology enables deal-making to continue in the COVID-19 world, it can also keep sellers focused on building the right relationships. “At Harris Williams, we know the strategic and financial buyers from years of working with them on prior transactions,” says Baltimore. “In addition to building those personal relationships, we use our CRM platform to systematically analyze which parties are best suited for certain engagements based on their past behavior. This approach has never been more vital.” 

“We’re always focused on selecting the right mix of buyers to engage on a deal, but the importance of being able to engage the right group has never been higher,” adds John Neuner, a managing director and co-head of M&A at Harris Williams. “Our database has been built over decades to help us track buyer performance and identify the types of deals, industries and company characteristics each party is most focused on. We marry that information with the real-time feedback from conversations across the firm’s relationships, which enables us to quickly identify the most likely group to have a dialogue with for every deal.”

3. Establishing a Rapport with the Buyer

In strong M&A markets, a steady pace, sustained competitive tension and solid relationships with buyers yield optimal outcomes. In challenged markets, the buyer rapport element becomes even more essential.

Establishing trust-based rapport requires tailored buyer engagement strategies that enable buyers to progress at their own pace. This allows buyers to manage challenges in their businesses or portfolios and accommodates the needs of third parties, such as lenders, accountants, insurance providers, legal advisers and others. Having high-impact, early interactions with buyers can also be very helpful, whether that happens via video chats, sharing of some limited information or other upfront buyer cultivation. In this environment, the buyers that have already established a relationship with the company are often those most compelled to pursue the deal.

“The ability of your advisor to manage the transaction at the pace of each buyer is very important,” says Wilkins. “At times this will seem slower, but being able to gently nudge buyers along and maintain the right deal pacing is everything. In this environment, companies must be bought, not sold.”

4. Flexibility and Creativity

Many companies that were considering a sale of the entire business may need to be open and flexible to different structures. Depending on the company’s characteristics or industry sector, its value may have been impacted, or the type of buyer may be limited to fewer options.

“We have seen deals that began as potential sales turn into mergers of equals with another industry player,” says Wilkins. “Discussions on minority deals are also becoming more common.”

Neuner adds that there are many companies considering more structured capital to bring on growth capital or to bridge the company until the economy recovers. “The key is to strike the right balance of mutual value in both the short term and the long term,” he says. “There is also the importance of creativity, especially when it comes to financing transactions. Last year, the access to leverage was readily available, but in the current market, some deals will require more creative financing to bridge valuation gaps and fill holes in the balance sheet.”

“We entered 2020 with the highest level of firm backlog in our history,” says Monjauze. “Many of those transactions were businesses seeking a sale. Since the arrival of COVID-19, we have been having conversations with many of our clients and prospects about being flexible on timing or exploring alternative structures that can meet their objectives.”


In summary, the way in which Harris Williams is “getting deals done” in today’s environment is fundamentally the same as at any other time—it just requires more of all the proven practices of successful M&A. Transparency, flexibility, communication, smart analyses and sheer effort have always been essential, and that’s never been truer than it is today. 

A Selection of Recently Closed Harris Williams Transactions

M&A looks different in this challenging landscape. We want to hear what you believe is most important to achieving successful transactions today. Click here to take our survey.

Published May 2020

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