Awakenings in the M&A Market? The Latest from Pillsbury’s M&A Webinar Series

Last week, Clearsight Managing Director and CEO, Joel Kallett, participated in the third installment of Pillsbury Law’s webinar, Awakenings? Current Status of M&A Activity. Clearsight joined M&A executives from defense contracting and technology sectors to share how the professional services industry is emerging from the economic impacts of COVID-19.

The full webinar as well as key takeaways are available below. If you would like more information on how Clearsight can help your business navigate the current M&A marketplace, you can contact us directly at info@clearsightadvisors.com.

Key Takeaways

• Despite a deepening economic recession and record 40 million unemployed, the current M&A market is outperforming the panelists’ mid-March expectations. This outcome is buoyed by the surprising rebound of the stock market from its late March lows as well as the slow reopening of cities across the country
• There is a significant decrease in the risk tolerance of both buyers –particularly PE groups— and lenders, making deals that require financing more challenging to complete
• Non-traditional financing sources are becoming increasingly attractive as traditional commercial lenders are more focused on their portfolios and less interested in new transactions
• Businesses that continue to perform well or are in sectors less impacted or even enhanced due to COVID-19 are receiving favorable valuations in the marketplace
• Industries that have proven more resilient in this market are Government, Healthcare, Telecom and Financial Services
• PE groups and strategic acquirers are focused on investments in their core focus areas that are small to medium size tuck-in deals, large-transformational deals are increasingly difficult to conclude
• Acquirers are split on whether or not they will incorporate pro forma COVID normalizations into their valuation analyses
• Strategic buyers are filling the gap left by some PE firms. PE groups are still active and want to keep their pipelines full but are impacted by lower leverage levels and overall market uncertainty
  • Leverage levels are down 1-1.5x turns of EBITDA and pricing is up 100-200BPS. This impacts the value PEG’s can pay and strategic buyers are seeing that as an opportunity