In White Paper

Chicago, IL – March 27, 2020

Two weeks ago, Balmoral Advisors provided its first on-the-ground evaluation of the M&A market for clients and other interested parties.  We continue to field questions on how the M&A market is reacting to global events, how these events are affecting transactions in the market or how to adapt strategies in preparation for launch.  As with the global events, our analysis continues to evolve with additional input from issuers, potential issuers, and investors themselves.

Balmoral has implemented varying degrees of adjustment to our sell-side advisory, buy-side advisory, and capital raising/refinancing deals, customizing our strategies to fit each unique situation.  Depending on the industries in which they operate, financial investors and corporate operators have begun to triage their situation, creating and implementing strategies to manage their business in the current environment.  Now beyond the logistical challenges of operating remotely, market participants are moving to more tactical measures.

Facts and Observations

  • With several late-stage deals that were expected to close in the first quarter, Balmoral has shifted the transaction timeline into the second quarter. Although there have been delays in closing dates, none of these transactions have been suspended.  All of these advance-stage deals continue to move toward closure.
  • Our earlier-stage deals have reacted more diversely. Some investment banks are recommending pauses for deals that are pre-IOI or have not yet launched.  At Balmoral, our perspective varies depending on the deal structure, the client, and the market demand.
    • One of our sell-side deals expects indicative, non-binding bids in early April. We are proceeding forward while reviewing the situation and buyer feedback.  To accommodate concerns around business travel, we plan to record a video tour of the Company’s facility and conduct buyer meetings by video conference.
    • This week, Balmoral launched a re-financing for a distressed company. The response from potential lenders has been encouraging for this client.
    • We have postponed the launch of a sell-side process until mid-April at the request of the client. The delay in this situation, at least in part, is due to the delay of pre-launch third-party financial due diligence.
  • Discussions with potential private equity buyers for our early-stage deals have revealed that a handful are focusing internally on crisis management with their existing portfolios and are putting a hold on any new deals. This appears to be more common among smaller firms.  Most financial buyers are telling us they remain interested in moving forward.
  • Strategic buyers, especially those who are funding acquisitions from their balance sheets, remain active on our deals.
  • The credit market poses uncertainty. For larger mid-market deals, and those requiring syndication, most lenders appear to be in a “wait and see” mode as a response to current events.  We believe that this reaction is representative of reevaluating underwriting criteria and credit strategies.  On the other hand, smaller mid-market deals seem to be continuing forward but treading lightly.
  • Some lenders have expressed that their appetite for new transactions depends on the specifics of each deal and the industry exposure. In some cases, lenders are reducing their leverage levels and asking the equity sponsor to make up the difference.


Potential Implications for Deals

  • We advise our clients to assume that deals can be completed and should not be put on hold in this market. Delays may make sense for some deals, especially those in which the economic impact of the COVID-19 is not yet measurable.  The decision whether to move forward with a transaction process should be made on a case-by-case basis in consultation with an advisor.
  • The travel bans are continuing to complicate deals where on-site meetings and facility tours are required. Some potential short-term solutions include:
    1. Increased use of videoconferencing.
    2. For facility tours, consider live streaming a tour for remote participants, or preparing and posting a recorded video tour.
    3. For non-domestic buyers and visitors, adjust the process timing and sequencing to allow time for travel restrictions to be lifted.
  • The economic uncertainty, temporary company closures, and shifts in supply/demand will alter financial forecasts and assumptions. Expect to quantify and explain the economic impact of the COVID-19 on financial performance and outlook.
  • If there is concern about buyers and lenders retracting, we recommend contingency planning. Have a few backup firms briefed and ready to step in, if needed.


At Balmoral, we are prepared to develop tailored solutions dependent upon deal-specific needs.  We continue to monitor the market and provide sound advice on how to react effectively. Above all, we encourage our clients and other partners in the industry to stay healthy.  Follow the direction of your medical community and local authorities, and be well.