Panel: COVID-19 has changed everything about business deals, but not necessarily for the worse

When it comes to health emergencies, it’s obviously easy to compare COVID-19 to the Spanish flu of 1918.

But, when it comes to business, David Blaskey thinks the present-day disruption is better compared to more recent events.

“This is a combination of a protracted 9/11 … and the financial crisis (of 2008),” he said. “People want to travel; they want to get out. They’re just trying to figure out how they can actually do that.”

Blaskey, the senior vice president of development and integration at Avis Budget Group, made this connection within his own industry as a panelist at the Association for Corporate Growth New Jersey chapter’s recent panel on mergers & acquisitions and valuations.

Moderated by Michael Lavelle, director of Appraisal Economics, the panel featured Blaskey, Jabbar Abdi, managing partner of Sidereal Capital Group, and Polly Mack, regional director of origination at the Riverside Co.

M&A had been hot before the pandemic. And, while deals obviously have slowed, there still is some reason for optimism.

Abdi said the demand is still present.

“There is still a lot of demand in terms of capital sitting on the sideline waiting for assets to come about and sort of pull out of this bottom,” he said. “We’re just waiting for signs of green shoots that the pandemic is under control.”

Mack said finding great deals in the middle of a global pandemic is no easy task. Companies, he said, have had to adapt their expectations.

“In the current environment, it’s just a lot less certain that a company is going to command a premium than they would’ve a year ago,” she said. “You’ve got sponsors who may be dealing with issues in their portfolio that require time and capital. It’s going to limit the number of participants in the market.”

Deals are still being made, though, and it is the structure of these deals where most of the changes can be seen, Blaskey said.

“I’m actually structuring deals with licensees who are looking for exits,” he said. “As opposed to going to levels of liquidation, they have an alternative of either selling, trying to figure out a way to restructure, or they may have some significant problems down the road.”

Many companies have been cutting costs across the board. On surface value, drastic cost-cutting gives the impression of a company making desperate moves to stay afloat.

Blaskey, however, sees cost-cutting as an opportunity for leverage.

“COVID is creating a burning platform,” he said. “Things that you used to think, from a cost-saving perspective, that you didn’t think you can do, you actually can.

“Now, the things you’re looking at and the leverage that you’re getting by doing more with less and all those different types of items, it’s giving you the ability to really change how you’re approaching some of the valuation processes.”

The panelists also agreed that it may be better to hold onto some of the practices learned during this time once the coronavirus pandemic is over.

“Even if, tomorrow, we had a cure for COVID, I do think it’s changed the way people work and the way transactions happen,” Blaskey said. “We’re going to have to adapt to that and see how people evolve.”

Abdi agreed.

“I think it’s going to remain as a tool in the tool kit,” he said. “Hopefully, we will have read the market correctly if we ever get back to what is considered ‘normal.’ I think it will continue to adjust over time.”

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