16 Apr Coronavirus, M&A and the Technology Industry
The coronavirus pandemic and the spread of COVID-19 are creating significant anxiety and uncertainty around the world. The human and economic costs are staggering, and we’re all concerned with the well-being of our loved ones and associates. It’s clear that the novel coronavirus has already had a significant effect on human lives, the general economy and the M&A environment, and that will continue until the uncertainty is significantly reduced.
There are two major areas of uncertainty – medical and economic – that amplify the broad anxiety that we are experiencing. Until we learn more about how to mitigate, treat and prevent the disease, it will be difficult to measure the economic effects and make confident projections. We are going to be in a volatile environment until the uncertainty is reduced and this is likely to slow or disrupt M&A deal making. We are witnessing this in our target markets of software, cloud, IT services, and other technology-enabled industries. We’ve seen some deals stay on track but slow down, while others have been put on hold until things settle down.
However, the key drivers in our target markets were strong before the crisis, and many will continue to perform well even during this disruption, so we expect that there will still be considerable M&A activity for attractive opportunities. Businesses with strong fundamentals and recurring revenue will be able to survive and may be in a good position to accelerate their growth and take advantage of opportunities in the future. For example, we’re seeing strong performance from software and service companies that provide secure and reliable tools and services for networked and virtual computing environments, such as IT managed service providers and cyber security software companies.
The current anxiety and uncertainty make it difficult to prepare for the time that stability and growth return to the market, but there will be significant opportunities for those that are prepared. This may an excellent time to streamline and position your business to accelerate as soon as the market is ready, and take advantage of M&A opportunities as a buyer or seller. We remain active in our markets and we’ve heard from many buyers and investors that are looking for opportunities to deploy their existing capital and take advantage of low interest rates. If you’d like to discuss your strategic positioning and market opportunities, please contact us.