Will the M & A Market Evaporate Because of Covid-19?

Many people are predicting that the Covid-19 recession will destroy the merger and acquisition market. While it is true that corporate acquisitions usually greatly decrease during recessions, that may not be the result of the current Covid-19 recession. We are seeing devastating outcomes from the various lockdowns. Unemployment is approaching the levels of the Great Depression. Companies are going bankrupt and businesses are closing their doors, not just for weeks, but forever. Law firms, like other businesses, are facing significant retrenchment. As the lockdowns end and the economy slowly re-opens, the business landscape is facing great uncertainty. Losers outnumber the winners, if there are any winners in such a meltdown.

Senior Executives Should Deepen Their Relationships with their Customers

Senior executives need to strengthen their relationships with their customer base. They need to contact the key customers to inquire what help they need. You should speak with them as friends, not as a meal ticket. They may be re-focusing their business and could use some friendly advice. Be that friend. Long after the customer forgets the specifics of the conversation, he will remember that you were there when he needed a friend.

Some Companies will Emerge in a Strong Position

Out of this financial disaster, some companies will emerge ready to face the “new normal”. Others will try but fail. All will be looking to grow, but new customers may be hard to find. All businesses will be looking to restore their relationships with their customers and find new accounts. Strong companies that have built significant reserves will look for opportunities to acquire struggling competitors to acquire a new customer base and, thereby, build market share. The struggling companies will be trying to salvage the value of their business by finding a buyer with cash.

The Buyer Will Retain Key Executives

If the buyer of your company wants to grow, it will want to retain those senior executives of the seller to maintain and build the customer relationship. s with the seller’s s. When your company is sold, you will want to reach out to the customers to assure them that you will be staying on to make sure the buyer continues to serve their needs. For that reason alone, the buyer needs you.

Bargain from a Position of Strength

While it may seem that you, as the seller’s CEO, is negotiating from a position of weakness, the opposite is true. The Buyer needs your relationships that you built over many years and they will do whatever it takes to retain you for the transition period. Therefore, your retention package should include a substantial salary, a limit on the number of hours you need to be available, and incentives for keeping key customers. Those incentives may be a bonus or equity in the buyer. The incentives may include a bonus for staying for a certain period of time. It should also maintain your insurance and, perhaps, some perks.

If this is not a strategic acquisition by a competitor, the buyer may need to retain you on a long term basis. Regardless of the reason for the acquisition, you need not, and should not, negotiate for yourself. While you may fancy yourself as a skilled negotiator, you need a lawyer who has experience representing countless others just like you. Call Mailly Law to set your consultation with such an attorney.