October 22, 2020

4 Key Considerations for Corporate Development in a post-COVID-19 World

By Abby Roberts, Sr. Director of Product Marketing

COVID-19 has upended the way corporate dealmakers approach transaction management, according to audience polling and panelist insights during our recent Future of Transaction Management panel. The webinar discussed key learnings from our corporate dealmaker survey, how dealmakers were adjusting their transaction management approaches to remote working, and best practices for corporate practitioners moving forward. Based on the discussion, here are four key considerations for dealmakers going forward

1. Adjust your due diligence timeframes

Like a roller-coaster, COVID-19 is shaking up traditional due diligence timeframes, slowing it down in some places and speeding it up in others. A full 54% of our audience said COVID-19 is slowing down due diligence – however an additional 20% reported due diligence was accelerating. So, what’s happening under the surface?

Financial analysis is taking longer. “The whole process is a cloud of noise,” said Carlos Cesta, VP Corporate Development at Presidio. “It was a joke on LinkedIn. What is EBITDA with a “C” on end? EBITDA adjusted for COVID-19.” Also, due diligence on things like buildings has become challenging, he reported, creating a need for additional verifications and checks.

Management meetings are faster. On the flip side, working virtually also has taken out a lot of logistical inefficiencies, according to Sally Baraka, General Counsel, and Head of Corporate Development for Alfresco. There is “less flying around and less ‘meet and greets’,” the four-time seller said of her experience running Alfresco’s September recapitalization to Hyland Software. “This was a quicker process than in the past.”

2. Expect new financial transaction types

According to our corporate dealmaker survey results, corporate development teams already work on a wide array of transaction types. With the advent of COVID-19, however, their project portfolios are being rebalanced like never before.

At 36%, a plurality of webinar poll respondents saw an increase in restructuring activity, notoriously the most complex financial transaction type out there. On their own, restructurings typically include an array of strategic tactics, including divestitures, refinancing, and, as a last resort, bankruptcy

However, restructuring are not the only transaction types on the rise. Respondents also reported upticks in other financial transaction types. With a business landscape completely changed in a post-COVID-19 world, embracing innovative new deal structures and transaction types will become part of the new normal.

For instance, this summer saw a “dramatic increase” in companies looking specifically for partnerships and collaborations, according to Justin Gans, VP Corporate Development at AeroVironment.  Either they were looking for a partner to survive through COVID-19, or they thought this was the wrong time to sell, he explained. 

3. Prepare for this financial crisis and the next

Unsurprisingly, business continuity and COVID-19 financial resiliency has shot to the top of corporate dealmakers’ priorities, according to audience polling. However, one interesting theme is that corporate dealmakers are not just considering COVID-19 fallout but preparing for unknown crises as well. 

“Remote work is here to stay,” Baraka said. “As companies look to invest in new tools or processes, the question will always be in our minds: ‘How do we enable this through COVID-19 or similar situations?’” 

Similarly, Gans reported that M&A insurers are firmly insisting that COVID-19 and other black swan events be excluded from what is covered. “I think people are coming to grips not just with COVID-19, specifically, but other unknown massive impacts.”

4. Move to a virtual technology mindset

COVID-19 has accelerated dealmakers’ use of technology to conduct transactions. “The single biggest trend is everything moving to virtual platforms,” said Gans. “In many ways, it is good for our practice simply because getting people together and flying results in is a lot of time and money spent just on logistics.” 

Technology won’t just help with online collaboration. “We wound up flying a drone over an area to verify if a physical installation was there,” Cesta noted. “The interesting question is, what activities will be face-to-face?” 

To succeed in this new virtual environment, professionals must embrace new best practices.

For instance, the ability to effectively handle virtual meetings and communicate remotely has become a critical skill set, Baraka said.

While the future remains blurry, corporate dealmakers are embracing new technologies, tools, and processes like never before. “COVID-19 has made everyone rewrite the playbook for the better,” Gans said.  

Do you have a virtual mindset?  Learn more about our new buy-side collaboration tool, Datasite Acquire.  

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