The last few months have created unprecedented chaos and disruption. We’ve seen businesses experience a “stress test” unlike anything we’ve ever experienced before, and unfortunately, we will inevitably see many businesses close their doors forever. However, we will also see many businesses emerge in a stronger position than ever by making the right strategic moves today.
While business owners are not enthused with this year’s performance, recent events have painted an unambiguous picture for potential buyers. By analyzing a “Stress Case” view of a potential target, buyers can pick and choose optimal candidates – particularly those with a strong infrastructure, steady and reliable growth, and a stable financial positioning. Buyers can also evaluate a target’s ability to endure the current environment and to develop an integration plan that is sensitive to the “new normal”. Potential buyers will also have the opportunity to strategically acquire equipment, IP, contracts and even new clients searching to fill the newly created void.
Acquisition financing is also available and quite favorable for qualified buyers. For example, the Small Business Administration (SBA)’s CARES Act is offering 6 months of forgiveness on all new 7(a) loans disbursed prior to September 27, 2020. These 7(a) loans have historically been an appealing source of financing for acquisitions and can require as little as 10% down. So, in addition to an increase in potential acquisition targets and access to acquisition financing, borrowing rates are at unprecedented low levels.
The key to capitalizing on this opportunity, is to perform comprehensive diligence, to obtain an unambiguous valuation and to structure a transaction that best protects your interests. If you are considering growth by acquisition, please contact Ken Segal at ksegal@lgallp.com with our Business Advisory Services group.
by Ken Segal
