Our clients seem to capture the sentiment best: “I’m ready to adjust to the new normal… just tell me when we are there.” Taking stock of our clients and their objectives, we’ve arrived at three different observations:
- Stay the Course – Our buy-side clients are pushing forward mostly unabated, although a bit more slowly
- In-Flight Caution – Several sell-side clients that were preparing to go to market are pausing to allow their end-markets to stabilize
- Launch – We have new engagements on the buy-side and sell-side that launched post-crisis and see a counterintuitive opportunity
We examine some select client engagements below and highlight where we’ve guided our clients on how to prepare for what’s next or how to take advantage of the current disruption.
- Our “Catalyst for Corporate Development” practice area provides turnkey M&A support for both standalone strategics and PE-backed portfolio companies. Overall, our buy-side clients remain active in their pursuit of acquisitions.
- Valuation has everyone’s attention given the decline in the publicly-traded market multiples and weakening of the debt markets. However, the negotiations for the middle market private companies at the center of most of our mandates remain steady – with a layer of sensitivity of course. We have not had a deal breakdown or defer, though we do see adjustments in pace to ensure structural remedies for both sides of the table reflect the current exogenous risk.
- Notably, we’ve seen an uptick in response rates from acquisition prospects. We believe this is primarily a function of sellers being jolted into more thoughtfully considering their strategic options. The usual M&A dialogue continues to take place, but perhaps with a greater sense of purpose given the dire near-term macroeconomic backdrop. We’ve outlined select situations and strategies currently at play:
- Global Strategic Acquirer – Pursuit of North American acquisition interests continues, albeit likely at a more measured pace during the next few months. Our client has identified 3 core vertical markets and 4 practice domain areas to explore. We have an active pipeline and have narrowed focus to the most engaged of targets, working to gradually move these along in the discovery process.
- National Strategic Acquirer – We launched this engagement into the direct headwind of this downturn as our client is determined to grow through acquisition. We’ve identified a wide range of attractive areas across the desired industry verticals and are in full pursuit.
- Private Equity Backed Acquirer – Our client is running a full buy-side process as this pandemic has amplified the need for their offerings and expertise. We are actively pursuing acquisition opportunities across more than a dozen domains both domestic and internationally.
- A significant part of our sell-side work involves what we call “Path to Liquidity” preparation. Together, we review our client’s business, assess areas for improvement through the lens of an acquirer or investor and help develop a path for an optimal outcome. Our work often leads to adjustments such as market positioning (e.g., niche market focus and dominance) or business model (e.g., amplify subscription-based elements). Once the initial shock of this crisis was behind them, we found our clients looking forward to this planning and assessment effort, perhaps as a way to overcome future uncertainties. Select sell-side mandates include:
- Growth Capital – Our client’s business is one of the few that is seeing growing demand from rising emphasis on the ability to deliver services remotely and to a distributed workforce. The current environment has highlighted the mission-critical nature of our client’s services, and we are full steam ahead preparing for a capital raise.
- Recapitalization – Our client is seeking a financial partner to help accelerate its growth plans, unchanged by the pandemic as mobility and remote management trends are further reinforced by today’s chaos.
- Buyout – A steady state of business coupled with a dynamic and well-seasoned management team have helped our client stay the course in preparing to go to market later this summer.
The Harbor View Team