insights
Tactics for companies to survive the Coronavirus crisis
A mix of tactical and strategic ideas that company owner-managers can use to survive the Coronavirus crisis (and plan for life once it’s over).
Having completed several quality deals in 2019, PEMCF began 2020 continuing the trend, with several deals scheduled to complete in Q1/Q2. A few weeks later, we face a different reality.
Whilst we still have live mandates on the go, the Coronavirus (COVID-19) pandemic has changed the transactional climate across the UK and beyond.
Many deals have been placed on hold or have collapsed, with Refinitiv data reporting a 31% drop in the volume of acquisitions involving British companies as at 31 March 2020. The Coronavirus has had a monumental impact on businesses and individuals, with the government’s lockdown effectively placing the UK in stasis.
Whilst deal flow has undoubtedly slowed down, we have witnessed a few other trends emerging across the market:
When the Coronavirus Business Interruption Loan Scheme (CBILS) was announced, it was intended to provide rapid financial support to SMEs that were losing revenue, and seeing their cash flow disrupted, as a result of the COVID-19 outbreak.
However, some business owner-managers have found it difficult to access this funding mainly due to limited resource bandwidth at the 40 accredited CBILS lenders (hence, slow response times), and banks not taking applications forward due to poorly presented cases.
Now more than ever lawyers are drafting tighter “force majeure” and “material adverse changes” clauses in commercial and corporate contracts. Essentially, parties are looking for greater abilities to backtrack if things continue to deteriorate from a wider operational and/or financial perspective.
PE funds are primarily focusing their attention on existing portfolio businesses and their management teams. Essentially, portfolio companies are being assessed on a case-by-case basis, with cash and costs being tightly monitored in the short-term.
Whilst these trends cover the banking, legal and PE markets respectively, they are united by the need for detailed cash flow forecasting.
However, we are also speaking with PE houses still prepared to consider new investments at this time.
CBILS applicants will benefit from well-presented cash flows, sensitivity analysis will help businesses to model out different financial scenarios before legal drafting begins, and stress-tested models will show how well capitalised PE portfolio companies are and what they can absorb in the weeks ahead.
We know our way around financial models. So please get in touch if you’d like to hear more about how we can help to build or test yours.