It is still early to effectively evaluate the impact of the COVID-19 pandemic and various related actions on the lower middle-market. Different people have different perspectives and the scenario is continues to evolve rapidly. Certainly at least two factors will have a big impact, including how long it takes to safely get the workforce back to work and how deep and long a recession we may fall into. However, we are beginning to get a perspective on what we can reasonably expect.
We will attempt to evaluate what impact COVID-19 is likely to have on landscape services mergers & acquisitions, including business owners who are planning their exit or are in the process of selling their business or are buying or considering buying another business.
We will be adding blog posts that address different elements of the M&A process and how they have been affected and steps business owners can take to best position their business during this difficult period.
Now that we are a month into rapid spread of the COVID-19 virus in the US and federal, state and local government’s actions taken in response, we can begin to try to make some sense of how this all may impact merger & activity in the landscape services industry.
Some of the immediate impacts we have seen include:
- Daily reports of the virus’s spread, with spikes in number of cases and deaths in many areas, including particularly New York and California.
- Much of the Nation is on “Shelter-in-Place” orders or similar restrictions. Many, many people are working from home.
- Almost all schools have closed, likely for the balance of the school year, and converted to distance learning.
- Initial unemployment claims that dramatically exceed the highest ever seen as all of the economy reacts to uncertainty. The most vulnerable industries with the greatest impact from the pandemic such as airlines, hotels and restaurants reeling.
- We have seen unprecedented stock market volatility. Using historical standards, we have had the end of a bull market, a bear market and then a new bull market all in a matter of days and we are far from through with volatility.
- We have had the administration and Congress come up with an enormous stimulus package which attempts to address many aspects of the impact in Americas with the goal of avoiding the economy entering into a very deep, prolonged recession.
With all these factors in play, it has been extremely difficult to step back and evaluate what is going on. Most organizations took some time to evaluate their game plan.
I think we can see some brought themes developing:
- Despite the dramatic and unprecedented events of the past few weeks, there is reason for optimism that we can get through this. The economy is resilient. We entered this scenario with a robust economy which will cushion the blow to some extent. This crisis environment will not go on forever.
- Uncertainty is always a negative for the merger & acquisition marketplace, but investment will continue.
- However, there remains a significant amount of “dry powder” in the private equity universe. In other words, there is significant capital that needs to be deployed. You can expect and already can see firms continuing to work hard on identifying investment opportunities.
- Some businesses will be severely damaged from the crisis and may become extraordinary values.
- The strength of other businesses may become clearer as they perform in this challenging environment.
- Business owners are well-advised to focus on the basics and ensure that their businesses continue to perform providing customers with quality service with as little disruption as possible and be calm and avoid panicing or overreacting to issues as they arise.
It might be a good idea to remember Warren Buffet’s famous statement that as an investor, it is wise to be “fearful when others are greedy and greedy when others are fearful.”
More to come.