In White Paper

Chicago, IL – March 2020

We have received many questions from our clients and others about the state of the financing and M&A markets. Questions such as, “What is the fallout from the health crisis having on the M&A and financing markets?”, “How does it impact our deal?”, and “What should we do if we are planning on launching a process soon?” – to name a few.

These are difficult to answer because the situation on the ground is changing so quickly. To help provide some data points, we would like to present the first of what we expect may be a series of periodic updates on what we are seeing in the markets. This update is based on our observations “from the trenches.” We will attempt to limit our thoughts to fact based observations, and suggestions based on those observations. We will avoid speculation because whatever we are seeing today could change tomorrow.

Facts and Observations

  • Balmoral Advisors is currently involved in varying degrees with a number of middle market transactions, consisting of sell-side M&A advisory, buy-side advisory, and capital raising/refinancing transactions. Our portfolio includes a mix of early stage growth companies, mature companies, and distressed/special situations.
  • We have projects that are about to kick off, and projects that are trying to get closed in the next 30-60 days.
  • We are seeing a pause by individual lenders and buyers on a small number of our transactions. So far, the impact is limited and appears to be very deal specific and not broad based. We are monitoring the situation closely.
  • The travel bans and related “distancing measures” are complicating deals in the short term where on-site meetings and facility tours are important and have not yet taken place. Thanks to modern communication technology, video conferences and teleconferences are replacing in-person meetings where possible. Most people (including the Balmoral team) are doing business from their homes.
  • Based on a non-scientific survey of our U.S. private equity relationships, transaction volume has been robust thus far this year with some firms experiencing as much as a 25% increase in deal volume. Over the past week, that increased level of activity has continued with routine progress being made.
  • We are a member of the Pandion Partners global M&A network. We have polled our fellow members around the world and the feedback so far is that the level of impact on deals varies by geography. In some parts of Europe, and especially Italy, many transactions have been put on hold. In other parts of Europe, and other parts of the world, the experience of deals going on hold appears less pronounced.
  • In other sectors, we have heard anecdotal stories of specific deals that have run into difficulty with financing. These appear to be isolated incidents that relate to the economic impact of the current global situation on the specific deal in question. We have not heard anything about a widespread change in financing markets. We are monitoring the situation closely.


Potential Implications for Deals

  • The travel bans are going to complicate deals in the short term where on-site meetings and facility tours are important and have not yet taken place. 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 may raise greater concerns about financial forecasts. Be prepared to drill down deeper into forecast assumptions. Also, be prepared for a greater scrutiny of current and recent performance.
  • If you are concerned about buyers and lenders pulling back, have a few backup firms briefed and ready so that they can step in if needed.
  • If you are thinking about launching a sale or financing process, keep a close eye on developments as they unfold. Talk to your advisor and get their read on the situation. Realize that a decision to delay probably means a matter of months not weeks.

Tailoring solutions is entirely deal specific so please call us directly to talk through your situation.