Increase the Value of Your Business During the Pandemic
Reflecting the simultaneous dual crises of the COVID-19 pandemic and the economic downturn, the rates of business mergers and acquisitions plummeted in the second quarter.
The volume of transactions fell 33.1 percent to 2,025, and the combined value of those deals dipped 26.7 percent to $336.8 billion from the same quarter a year ago, according to the most recent edition of the PitchBook North American M&A Report.
“M&A activity in the quarter continued to decline as COVID-19 remained an unrelenting problem in North America, especially in the U.S.,” said PitchBook Data analyst Stephen-George Davis.
The technology and health care industries remained strong in the M&A market, benefitting from pandemic “side effects,” Davis said, while “frail” companies in the energy sector are completing deals just to survive.
The trends are being felt acutely in Wisconsin, according to Robert Jansen, co-founder and managing director of Bridgewood Advisors, which provides guidance for mergers and acquisitions from its office in Milwaukee’s Historic Third Ward.
“While M&A volume collapsed in the second quarter, valuations remained remarkably strong. This is particularly true for companies well-positioned to weather this downturn, either inherently or by design,” Jansen said. “High-quality, high-performing, resilient businesses remain in extremely high demand. For those increasingly scarce high-performing companies, and those with solid fundamentals, it’s clearly still a seller’s market.”
The current environment provides unique opportunities for strong companies with healthy balance sheets to differentiate and outmaneuver private equity groups and experienced acquirers that have traditionally had advantages, Jansen said.
For this week’s column, I asked Jansen to share seven ideas for increasing a company’s value during the pandemic.
Set long-term strategic priorities. “At this key inflection point, those who persevere are devoting meaningful time to analyze their business model, cost structure, supply chain and competitive position. Value is created by balancing short-term pivots with continued investments in support of a thoughtful and disciplined long-term strategy,” Jansen said.
Focus on growth and cash. “These two factors continue to be universal contributors to business valuation, while also increasing the population of interested acquirers. Companies that have found ways to quickly stabilize or even improve cash flow while maintaining a growth-oriented mindset will clearly be rewarded,” Jansen said.
Innovate. “Whether finding new ways to engage customers, energize employees, react to evolving market forces or drive new business, companies that innovate are surpassing complacent competitors at a faster pace than ever,” Jansen said.
Invest in talent. “Skilled talent at all levels remains a vital value driver when selling a company. The current environment can present incredible opportunities to make targeted additions of top talent, in parallel to investing ongoing resources into training,” Jansen said.
Embrace technology. “With the rapid adoption of virtual meetings, remote team coordination and electronic file sharing, companies with a modern infrastructure that effectively leverage technology are proving to be more productive, more cohesive and ultimately better-positioned,” Jansen said.
Diversify. “While certain industries have been decimated, others have fared well or even thrived. These extremes have underscored the benefits of diversification among customers, industries and product lines. Such diversification translates to more stable and predictable future cash flows, and higher business valuations,” Jansen said.
Demonstrate resilience. “Much like the Great Recession, prospective acquirers will scrutinize how companies performed through these unprecedented times. Those that have demonstrated strong leadership, positive cash flow, thoughtful scenario planning and agility in weathering the storm will be in greater demand,” Jansen said.
Name: Robert Jansen
Title: Co-founder and managing director
Company: Bridgewood Advisors, Milwaukee
Expertise: Mergers and acquisitions, including strategic acquisition searches, private company sales, corporate divestitures, deal negotiations and transaction structuring.
Education: Bachelor’s degree in business from the University of Wisconsin-Milwaukee. He also is a Certified Public Accountant and has a Financial Industry Regulatory Authority (FINRA) securities license.
Family: Wife, Sarah; sons, William and Greyson; and pet rabbit, Ellie
Best advice ever received: “Give back generously and enthusiastically.”
Community Involvement: Milwaukee Public Museum (endowment committee), United Way (campaign cabinet) and Association for Corporate Growth (board member and programs chair)
Favorite musical artist: Ray LaMontagne
Favorite Wisconsin restaurant: Pre-kids: Sanford; post-kids: City Market.
