What We Are Seeing in the M&A and Capital Markets

It seems like in the blink of an eye that we were celebrating the end of 2019, a transformative year for Intrepid. Then COVID-19 happened. Every calamity in history, whether caused by man or nature, inflicted pain and loss, often followed by innovation and growth. COVID-19 will be no different.

Covid-19 Update: What We Are Seeing in the M&A and Capital Markets for 2020

Markets need the ability to price risk in order to function. The speed of change and lack of visibility of the scope of the damage and the timing and velocity of the rebound make it difficult to price risk and value assets.

Everything is happening at unprecedented speed: The Fed and the government responded with a record combined $4.3T stimulus and liquidity package in weeks, not months as in previous crises. The equity markets fell by a record 34% from their peak in only five weeks and regained half their losses in the ensuing three weeks. Depending on the circumstances, we are taking different paths to maximize value and probability of closing in each of our mandates. In some, we are extending the process timelines to allow for more buyer diligence, while putting other processes on temporary hold, while accelerating market entry and shortening timelines in other mandates. Each situation requires experience-based, informed decisions.

  • Private equity funds – Sponsors have resumed their active search for complementary targets to strengthen their existing platforms, after pausing briefly to address the liquidity crisis in their own portfolio. Most sponsors have slowed down their pursuit of new platform investments.
  • Alternative capital funds – Junior capital is still available in the middle-market from a large number of alternative capital funds seeking to invest in sound businesses that are facing temporary liquidity stress.
  • Strategic acquirers – Most corporate buyers are focused on their own liquidity needs and reprioritizing their acquisition pipeline but continue to pursue targets of strategic relevance.
  • Sectors seeing greater investor interest – Some companies are experiencing a surge in demand for their products and services, prompting them to accelerate their pursuit of a sale or recapitalization. Some of our clients who are benefiting from such lift include those in the branded packaged food sector, tech-enabled services for hosting remote meetings, online marketers of essential products, and local delivery and logistics businesses.

What Entrepreneurs Should Do

We are advising every CEO operating in a crisis environment to consider the following:

  • Act with urgency
  • Focus on liquidity
  • Access alternative capital solutions in addition to pursuing government relief options
  • Be transparent and overcommunicate with all stakeholders
  • Team up with a financial partner to acquire weaker competitors
  • Consolidate and merge to gain scale, efficiency, and market share

What Intrepid Is Doing

Crises offer opportunities for growth. With the financial strength and resources of MUFG Union Bank and its parent Mitsubishi UFJ Financial Group (NYSE: MUFG), the world’s 5th largest financial group, Intrepid continues to focus on growth, actively looking to hire senior talent in key verticals, including healthcare, software, and industrials.

We believe that notwithstanding the casualties, this crisis will offer some unique opportunities for growth to those entrepreneurs who will be proactive and bold. There is no one size fits all answer as each situation is different and requires an understanding of the forces and opportunities in each industry sector. Please take the time to read the insights of our industry bankers accessed from the links below.

We would be honored to share our experience and help our friends in the business community assess their options to weather this latest storm.

Stay healthy, exercise good judgment, and be bold!