Following the outbreak of COVID-19 and the devastating effect it is having on the world, Jo Haigh, CEO of fds, reflects on how it has had an effect on business sectors and what the future could hold for business sales, acquisitions and fundraising.
It’s definitely going to be an interesting period for traditional M&A activity, post-COVID-19. There will I feel, come about a “new normal “ as a lot of the dry powder out there is ignited.
Realistically I think the record high valuations, seen in more recent times will be some years away. Although I predict that some sectors will see exponential growth especially in the health care sector, streaming services, online food and wine companies, gambling and gaming, cleaning and waste management and anything selling health products, will skyrocket.
Strangely, I also predict, the hospitality sector will experience a boom period, as the weeks of isolation the public have suffered, will leave us yearning for company and social experiences. Not to mention a much-needed change of scenery from the inside of our own homes!
It goes without saying that businesses in these sectors, will have to create a new norm pattern for socializing and social distancing at the same time. It will take some time for everyone to feel comfortable being too near anyone (God help you if you sneeze or cough when you are out and about!).
If you are selling your business, the key to what’s going to be attractive is your cash generation history and prospects. The age-old mantra of ‘you only run out of cash once’ has come to the forefront of many business owners minds.
If you have put marketing and building brand awareness on hold through this crisis, I would strongly suggest you think again! History shows that those companies that survived and indeed thrived in the Great Depression, were the ones that marketed the hell out of their business. This will bring about not only awareness of who you are to prospective buyers but also will have a great impact on widening your customer base.
For those wishing to raise finance, never has money been so cheap and I think we will see it that way for some time to come.
If you are an owne- manager who is struggling to keep all the balls in the air, maybe the COVID-19 has been one step too far for your own mental health. Providing you have a good management team in place, then a VIMBO (vendor initiated management buyout) will be far easier to fund.
Looking at the private equity market, I predict they will be both looking to de-camp from some of their less successful or non-core activities, perhaps presenting some “fire sale“ opportunities. Equally, they will still have pots of money to spend, and will, therefore, be on the lookout for deals.
For those that have lost their jobs, there will be a massive spike in new business births and start-ups. For the right people with the right ideas and an understanding of risk, there will be funders.
We have been submerged into a new way of working and at the end of this crisis, we need to be ready to shape the brave new world of business.
If you want to know how fds can help you and your business, please get in touch via our contact page.