30/04/2020 - News
Completing deals when times are tough
A message from Phil Burns, Managing Partner
The 23rd March seems a long time ago – the evening when our Prime Minister, Boris Johnson, addressed the nation and asked us all to stay at home.
Since then businesses have shut their doors, thousands of staff have been furloughed, our magnificent NHS has taken care of so many seriously ill, and Captain Tom Moore has completed 100 laps of his garden and is rapidly approaching £30m raised for the NHS.
Clearly, our first concern is for everyone deeply affected by this crisis – our thoughts are with those who have lost loved ones, those who have battled severe infection and those working in the NHS, care homes and other essential services and industries that are doing so much to support the most vulnerable.
One month on businesses are getting to the end of the first phase of COVID-19 planning – staff have been furloughed, the bank has been spoken to, the cash has been protected and the applications for support are being submitted. The question many of our clients are asking us is what’s happening to deals, can I still get funding for my business, can I still exit?
Across Clearwater International, we have completed 10 deals in countries where there is a lockdown. Our latest deal in the UK saw Clubhouse Golf, the UK’s leading online golf retailer, sold to all4golf, a German online golf retailer. The business attracted a healthy valuation and the deal completed while the country is in lockdown.
What do these deals tell us for the future?
- High-quality businesses, with clear defendable market positions, will continue to attract acquirers and investors
- As with the financial crash in 2008 businesses that traded well going into the crisis are likely to strengthen as we leave the crisis. For example, activity will have moved toward online businesses at a faster pace during the coronavirus crisis and this will further cement the attractiveness of this space to buyers
- Strategic rationale for buyers is unlikely to change during the crisis – in Clubhouse Golf’s case, the desire for all4golf to dominate the European market is unaffected by the coronavirus crisis. Therefore, good businesses with a strong rationale for a merger will remain attractive
- High-quality buyers and investors will have their challenges during lockdown – but they too will emerge with cash reserves and an appetite to acquire. We expect investors and buyers will quickly look to unlock returns by investing in new businesses
good businesses continue to be of interest to investors and buyers
So, while the landscape will change significantly during the current crisis, good businesses continue to be of interest to investors and buyers. Those wanting to capitalise on the opportunities that will arise as this crisis unfolds and as countries begin to reverse the lockdowns need to be ready. Preparing to raise finance or undertake a sale process takes time – while we are still in lockdown businesses would do well to take advice, commence planning and get ready to take advantage.
