COVID-19’s Impact on M&A
Many merger and acquisition processes are on hold while buyers and sellers seek greater clarity on COVID-19’s health and economic effects. COVID-19’s impact on M&A continues to reshape transaction planning, buyer expectations, and deal execution. Although transaction activity has slowed, companies continue preparing for future opportunities as markets adjust to rapidly changing conditions.
Business owners considering a sale should expect the pandemic to influence nearly every stage of the acquisition process. Buyers, lenders, and advisors are reassessing risk, valuation, and transaction structures. As a result, successful transactions will require greater planning, flexibility, and collaboration than before.
Several areas now deserve increased attention.
Preparing for Sale. Business owners should determine whether now is the right time to pursue a transaction. They should also evaluate current valuations and consider whether buyers will recognize the company’s long-term value despite recent disruptions.
Timing. Transactions will likely require additional time to complete. Travel restrictions, remote work, lender requirements, and extended due diligence may delay the closing process.
Due Diligence. Buyers will conduct more extensive due diligence across financial, legal, operational, and commercial matters. They will closely examine force majeure provisions, supply chain risks, emergency preparedness, employee matters, and insurance coverage.
Acquisition Agreements. Buyers and sellers should expect increased negotiation over risk allocation. Acquisition agreements may include expanded representations and warranties, interim operating covenants, earn-outs, additional closing conditions, termination rights, and special indemnification provisions addressing COVID-19-related findings.
Financing. Buyers should confirm that attractive long-term financing remains available before committing to a transaction. Lenders may impose additional underwriting requirements or modify financing terms as market conditions evolve.
Business owners should work closely with experienced M&A advisors throughout this period. Professional guidance can help navigate market volatility, manage transaction risk, and position a company for a successful sale when conditions improve.
