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M&A Insights – Mark Young, Managing Partner, CKS Advisors

Welcome to the April 2020 edition of M&A Insights. Our goal at CKS Advisors is to help you stay up-to-date on the Mergers and Acquisitions climate.

We hope everyone is staying healthy and safe in these uncertain times.

This month, we would like to highlight COVID-19’s initial impact on Lower Middle Market deal making.

Key Points:

First and foremost, as you would expect, it’s too early to predict what the mid-to-long term effects will be.

However, what we are seeing and hearing regarding the short-term is:

  • Buyers, both Private Equity and Strategics, have pressed the pause button on approximately 50% of their deals, according to a Survey conducted by the Private Equity Info Database.  We echo those numbers.
  • Buyers are not only concerned about what the future will look like for new acquisitions, but also are focusing more of their attention and resources on stabilizing their companies.
  • According to Pitchbook, a slowdown in Lower Middle Market deal volume will occur in 2020, as would be assumed. However, should the timing of COVID-19’s regression occur as expected and the general economy responds in-kind, Pitchbook feels a recovery prior to year-end is possible due to Buyers still maintaining record cash levels needing to be deployed.
  • RSM’s Economist Kevin Depew recently stated on ACG’s Middle Market Growth Podcast, “I’m optimistic that once we get through this and we understand the magnitude and duration of the pandemic…  the middle market [economy] will bounce back fairly quickly. It’s just that right now, we have no way of knowing how long that’s going to be and when the economy will start to re-open.”

 

What We Expect to See:

  • When States, Cities, and businesses re-open as the COVID-19 curve flattens:
    • Relatively strong return of the economy as businesses move forward.
    • Buyers resume their acquisition activities, initially at a slower pace, with the crisis’ overall impact on M&A volumes and valuations to be determined.

 

In closing, be safe and united, we will get through these times.

 If you would like to learn more about the M&A market or are ready to take the next step to explore your options, we would be glad to meet. Please contact me at 480-351-8533 or myoung@cksadvisors.com.

 

 

This Post is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, CKS Advisors, LLC and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of CKS Advisors, LLC are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. CKS Advisors, LLC and Ashland Securities, LLC are separate and unaffiliated entities.  Securities and Investment Banking Services are offered through Ashland Securities, LLC.