Dealmaking under quarantine: 8 private equity and M&A pros share strategies while social distancing

Keep in touch

How are you nurturing relationships with other dealmakers during social distancing?
Now more than ever, it is critical to be in touch with clients who are looking for advice and guidance. Luckily, technology has been able to plug some of the holes created by stay-at-home orders and social distancing. I spend a lot of time on calls, both Zoom and old-fashioned ones, as well as constantly emailing with clients and colleagues. Stifel has also initiated a regular conference call series for clients with various experts from inside and outside the firm, designed to provide insight on timely issues. We are transitioning many of our physical conferences to virtual events and we are producing more market intelligence and analysis than ever before. I miss seeing clients in person, of course, but we’re all maintaining dialogues one way or another.

It’s interesting – dealmaking has already changed a lot from when I first got into the business, when every negotiation took place in a law firm’s conference room, couriers raced around with physical documents, and some poor analyst stood guard over an actual data room. So much has already gone digital, with virtual data rooms, videoconferences, virtual roadshows, etc. This current environment is just taking it to an extreme. Dealmakers are getting creative, offering up drones for due diligence, digital site visits, NetRoadshow or Zoom management presentations, and a lot more virtual interactivity than ever before. It’s pushing the limits, but unfortunately, can never fully replace meeting a management team face to face and really getting to know them. One upside though – no travel means everyone is a lot more efficient, and cycle times are accelerating on deals.

What advice do you have for other dealmakers?
All M&A cycles are unique, and this situation will certainly play out differently than past pullbacks. Event-driven downturns, which this is, typically recover faster. Companies in many sectors (technology in particular), financial sponsors, and capital providers were generally in strong shape before COVID and should be positioned to act quickly as the market recovers. In the meantime, our latest Stifel Global Technology Group survey found that more than half (55%) of tech executives are still planning to pursue add-on acquisitions in the near-term. We also expect to see an increase in distressed dealmaking as opportunistic buyers see value in companies that have been especially hard hit by the coronavirus and the concurrent market selloff. Buyers clearly have the advantage, and upfront cash offers will be king in this environment, as credit markets are tight.

Anything else you want to add?
Keep an eye out for hostile M&A activity. Historically, we have seen dramatic increases in hostile takeover attempts during periods of extreme market volatility. Strategic and financial buyers are already on the hunt, looking for companies with depressed stock prices and/or liquidity concerns that can be picked up on sale. The hospitality, retail, transportation, and energy sectors are particularly vulnerable during the COVID-19 crisis. Our activism defense team notes the overall number of shareholder rights plans enacted by companies so far this year already equals the number enacted in all of 2019. And, no surprise, but we’re also seeing a dramatic increase in activity at Miller Buckfire (Stifel’s restructuring business), as well as capital raising for companies near or in distress.

Only human

How are you nurturing relationships with other dealmakers during social distancing?
It is interesting that during this time, in some respects it is easier to build relationships. For the first time, we all have a common social thread – stay at home. Under normal circumstances, we would meet someone and look for that common thread. It is now readily apparent and an easy topic of discussion and all seem interested in sharing experiences in this stay at home environment. Further, meeting folks over a video conference from their home is immediately humanizing. With the lessening of formality, the ability to interact and establish a connection is much more rapid, allowing you to cross the first threshold to transacting business together.

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
Since no one is traveling, it has been much easier to schedule calls or in-person face-to-face Internet meetings. People want to be productive and are more inclined to fill up their days with a focus on business potential. In my role as counselor to many businesses, I am not typically perceived as a resource for potential deal flow. With the opportunity to virtually meet with PE fund and investment bank representatives in a meaningful way, the perception of my role as a deal source is shifting. Not to mention providing timely information on government programs that are useful to their business.

What tools are you using?
Dealmaking has shifted from the meetings in a conference room to conference calls and virtual closings over the past many years. What is new is the use of the face-to-face Internet meetings that has created a new dynamic.

What lessons have you learned?
The value of care of your personal self as a priority. I have been incredibly surprised that I can sustain the level of productivity in working from home that I have experienced over the past month. We are inundated with requests from clients for guidance and analysis of the CARES Act and attendant financial relief programs. I have been on at least six webinars over the past four weeks, sometimes two in one day. Taking some time out every day for some personal down time is not something that I had previously done consistently. Doing this has enabled me to be much more effective.

Have any deals you’re involved with been derailed by the coronavirus?
In general, deals have been put on pause in order to gauge how the business will respond once non-essential businesses are allowed to re-open.

What advice do you have for other dealmakers?
Stay positive, even at times when it feels impossible. The news is relentless. There is no way to minimize the tragedy our great nation is suffering along with the rest of the world. But give yourself a break from the continued coverage and find a few minutes to stop and take a breath away from it all.

Anything else you want to add?
I hope that when this is all over, we all remember this time as moment when we took a pause and remembered to appreciate all of our blessings. In this unique industry where we create value for many people’s lives, I am mindful of the effect all of this has had on my own family. If they haven’t grown too tired of my never ending conference calls and clicking on my keyboard into the late hours, I intend to do this work from home thing more frequently.

Heide was named one of Mergers & Acquisitions' 2020 Most influential Women.

Open for business

How are you nurturing relationships with other dealmakers during social distancing?
Emotional Quotient (EQ) is more important than ever during trying times. It’s critical to remember that the dealmaker on other side of the (now figurative) table is a person, too. They have good and bad days and presumably know many people in high-risk categories, potentially even themselves. Being extra thoughtful about each interaction is important. When feasible, we have reached out to friends in the deal community to see if they need anything dropped off for them or a loved one. The deal community is also becoming increasingly comfortable with video conferences and even “Zappy Hours” (Happy Hours via Zoom).

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
Absolutely! For lack of a better term, we remain “open for business” and are pleased to have been able to live up to our commitments to entrepreneurs and have completed several new investments during the last few weeks. A couple stand-alone new investments, some add-on acquisitions and our B2B SaaS growth capital team (Riverside Acceleration Capital) is as busy as ever as entrepreneurs are relieved to hear they are actively deploying non-dilutive capital.

Each time we announce the completion of a new investment, it seems to catch a great deal of attention from long-standing relationships, and we’ve been contacted by many new contacts as well. The business community seems to be comforted that equity capital remains available and is being actively deployed during the crisis. We have spent a great deal of time contacting our friends at other private equity firms to let them know we are here to help them too! After all your “competitor” today could be your partner on a new investment tomorrow.

What lessons have you learned?
I’ve learned how much time I spent driving between meetings, in airports, etc. I have been able to recoup a significant number of hours and allocate those to being more productive.

We are all learning numerous lessons in video conferencing, including new types of etiquette. We notice nuances such as our eye-level in relation to the camera placement. Many are finding ways to add humor through their virtual backgrounds.

What advice do you have for other dealmakers?
In times of stress, it is best to double down on communication. Daily team huddles to kick off the workday have been both effective and enjoyable. In many ways, we are in better sync than we have ever been before.

Have any deals you’re involved with been derailed by the coronavirus?
While we certainly saw scores of investment bankers put their processes on hold, what is more important to note are the private equity firms that continue to support the economy in our own way. We should all celebrate that new investments are getting done. An important benefit of having committed capital is the ability to deploy it, even in times of crisis.

Additionally, we should seek to share the many creative ways our portfolio companies are helping their communities, whether it be our portfolio company, Marena, switching from making post-surgical compression garments to joining the legion of apparel manufacturers answering the call to make masks and gowns, or Cardinal - in addition to manufacturing glass shower doors, they are also making glass barriers to help protect employees in grocery and other essential business.

Lend a hand

How are you nurturing relationships with other dealmakers during social distancing?
Notwithstanding the terrific technological tools available to us, there is still no substitute for a face-to-face meeting, a pre-work breakfast, or late-night white-boarding session in a conference room. However, you can accomplish a lot with a phone call, an email, or a video call. It’s not perfect, nor is it as spontaneous, but it’s important.

During the last couple of weeks, I’ve been reaching out to people, not with a focus on developing business — but really to be solicitous of the challenges that people are undergoing — professionally and personally. I do think that in a strange way, this crisis and the corresponding slowdown in deal volume has created the space to have some of the more meaningful conversations than I’ve had with clients in years.

Starting new relationships from scratch is the toughest task in this environment. There’s very little practical way to do it at scale. However, activating your existing network can lead to a lot of warm introductions. People need help in a variety of ways. Some of those conversations may immediately lead to new transactions; some are longer term investments in relationships. I’ve found that simply trying to help rarely requires me to give more than I get back—even if it’s down the road.

What tools are you using?
We are so fortunate that a number of the video conferencing technologies have finally gotten to the point where they are ready for prime time. That’s been a help. However, given the nature of modern transactional work, the overwhelming majority of dealmaking was already being done primarily at a distance. From that standpoint, the pandemic has impacted dealmaking velocity and volume, but it has not caused a fundamental shift in process.

What lessons in dealmaking have you learned?
The biggest challenge that I’ve encountered, which I’m sure is the same for many, is maintaining the discipline and focus to work efficiently. My home office is in my attic, and it’s very easy to float downstairs between conference calls and engage in the work-from-home version of “water cooler talk” with my wife and kids.

Have any deals you’re involved with been derailed by the coronavirus?
We’ve seen little in the way of a consistent theme — the market has not moved in a monolithic way. Overall, volume is down — but we’ve had processes continue to move forward, while others have paused.

Given the otherwise robust start to 2020, everyone is generally optimistic that when some level of normalcy returns to the market, it will result in a few strong quarters for dealmaking.

What advice do you have for other dealmakers?
Despite the fact that this is a challenging environment, remember that it is tremendously important to keep perspective. This turbulence will pass, and dealmaking professionals are immeasurably better positioned than most in our society to weather this storm and to take advantage of the opportunities that recovery will present. Maintain a deep sense of gratitude for this — and try hard to ease the hardships that those around you are facing.

Stay connected

How are you nurturing relationships with other dealmakers during social distancing?
It is more challenging, but I also feel that since we are all in the same position of physical distancing and remote working, we instantly have a topic to discuss. The situation allows us to be more personal and more human as you could be hearing or seeing family members or pets in the background of calls/videos. I am continuing to send emails, set up phone calls, arrange video meetings and attend virtual events.

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
In the past few weeks, I have met new people and at NepFin, we continue to see new opportunities. We have seen a range of opportunities from being asked to participate in other lenders opportunities, offer a solution for a broken sale process and look at potential refinancings for sponsor backed portfolio companies with current lenders that may have liquidity constraints. We have not seen many traditional new M&A transactions come across our desks but there are a few. A variety of firms are hosting virtual events bringing their networks together and facilitating good discussions around the market and current environment. I am still following up the way I would if the event was held live.

What lessons have you learned?
People want social interaction, regardless of form. I have been pleasantly surprised how quickly everyone has adapted to this new environment and implementing technology to work remotely. This shift has emphasized which companies and places are flexible and able to change fast. I have still been busy talking to people, sharing thoughts with each other and discussing our businesses.

Have any deals you’re involved with been derailed by the coronavirus?
We had a few deals we were moving forward with that shifted very quickly. The dynamics around industry, pricing and structure have rapidly changed and most transactions that were in process have been put on hold.

What advice do you have for other dealmakers?
Staying connected is extremely important, especially now when we are physically isolated from our friends and extended family. Make time to set meetings, have calls and video meetings. Set a daily work routine and stick with it. It helps to prioritize the day and be efficient.

Anything else you want to add?
The abrupt shift in daily life has been a huge adjustment. As with most things, there are positives and negatives. I have settled into a different routine at home with the kids by creating a daily schedule for calls, virtual events, catching up on news, emails, etc. It also includes an hour lunch break to re-energize by taking a walk, bike ride and spending time with my children. I am enjoying this immensely and we all look forward to a mid-day activity. At other times, physical distancing has felt extremely isolating and lonely. While using some of the social media platforms has helped, it does not replace the in person interaction at meetings, conferences and events. I completely understand and respect these restrictions keeping everyone safe and I am definitely looking forward to being back on the road and seeing people when allowed.

Kovacic was named one of Mergers & Acquisitions' 2020 Most influential Women.

Foundation of trust

How are you nurturing relationships?
Since the founding of Harris Williams, we have put a focus on deep, tenured relationships with our clients, and we continue to nurture those relationships. The inability to meet face-to-face doesn’t change the foundational trust of our relationships, and in some ways our relationships have grown. We are all connecting on a personal level as we navigate this together, talk about our families and health, and open up beyond business. We have been diligent in our client outreach, having regular meetings and ensuring follow up plans to continue to provide thoughtful and consistent advice. As a firm, we are also developing and sharing content about the current environment on an ongoing basis.

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
Our unwavering focus has been on our clients and partners. We are here to be thought partners during this time, and we are dedicated to supporting them in any way – whether that’s discussing existing portfolio companies, continuing to progress a transaction, or starting to plan for the future. We have some clients asking us to pitch virtually and have secured several commitments for new transactions.

What tools are you using?
We have ensured that our employees are equipped to work from home without sacrificing connectivity or effectiveness. Data rooms and the ability to facilitate diligence remotely have been critical to progressing transactions. Some clients have had virtual management presentations and virtual facility tours. We’re actively evaluating what needs to be done in person versus remotely – we suspect some activities may remain digital after this period. That said, there remains a human element – strategics want to welcome new teams to their family the right way and private equity groups want to celebrate a transaction with management teams – so we expect some deals that have been put on hold to pick up quickly once travel restrictions are lifted.

What advice do you have for other dealmakers?
We believe this is a near-term event for long-term investors. The desire to invest remains – many private equity groups and strategic buyers are actively seeking to deploy capital. Deals are still getting done – in the last few weeks, Harris Williams has announced multiple transactions, including advising Pathway Vet Alliance, Lansing Building Products, Kissner Group Holdings, and PowerTeam Services, as well as signed new purchase agreements. We have successfully navigated uncharted waters together with our clients in the past and will do so again now.

Have any deals you’re involved with been derailed by the coronavirus?
Each company’s situation is unique during this time of uncertainty. Some transactions have closed amid the uncertainty, some deals continue to progress, some companies are in a holding pattern to see how they come out on the other side, and other transactions are being prepared to launch once we come out of crisis-mode.

Anything else you want to add?
We’ve always relied on key, trusted relationships, and having candid, credible, and open conversations will get us through this time. Everyone is adapting to swift changes in the economy and assessing current and, more importantly, future performance. Strong teams will come out of this stronger and should consider developing a plan to determine what a new partner could contribute – on the flip side, it will be important for investors to communicate the value they can add aside from capital.

Stay close

How are you nurturing relationships?
At William Blair, we are fortunate to have deep relationships and purview across a variety of end-markets and geographies. This gives us unique insights in a rapidly changing world. Importantly, our clients and prospects want to hear from us, and we have put systems in place to share intelligence across our firm to bring insights to bear for clients and prospects. We have also leveraged technology and our network to bring our clients together to share best practices on addressing common concerns. We have hosted small group calls with over 100 CEOs to discuss the challenges they face running a company in the new COVID-19 environment and share ideas for providing leadership for their companies during this critical time. Now is not the time to hide from relationship building. Years from now, people will remember who offered ideas, advice, and resources during this difficult time.

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
Our primary focus has been to stay close to companies and investors that we know well. During times of crisis and uncertainty, people turn to advisors they respect and trust. Dealmaking in this environment needs to be catalyzed rather than driven through a broad auction process. That requires knowledge of a target, its likely acquirers, and an appreciation for which investors and/or strategics may already know the target well. Still, as private equity firms and their portfolio companies move past the triage stage, we are beginning to see good companies that will withstand the current economic disruption relatively well begin to think about advisor selection and preparation. While timing for a process launch remains uncertain, this is a good time to focus on pipeline building and prep work with new clients.

Communication and transparency are always important, but even more so during times of uncertainty. Frequent and honest communication is necessary to keep clients informed of rapidly changing economic, M&A, and lending environments. The importance of bringing ideas and having a perspective has been elevated during the crisis when busy executives and investors have little time for “check-ins.” This environment has forced us to be more creative and deliberate about when and why we communicate externally. Beyond external communication, internal communication is more important than ever in a work-from-home environment. Daily and weekly check-ins have been critical to both transition to a work-from-home formation and ensure that our teams are aligned and engaged on client and prospect work.

What advice do you have for other dealmakers?
This environment requires honesty and creativity. Be honest about what is possible given logistical challenges to engage with potential counterparties and uncertainty related to the impact of the virus and resulting valuation implications. Now is not the time to blindly press forward and hope for a good outcome. Nevertheless, M&A professionals have an opportunity to use creativity to catalyze transaction activity. Transactions that are more likely to progress in this environment include highly strategic acquisitions by corporate acquirers or transactions among counterparties that know one another very well (e.g., two private equity firms that have done business together in the past). This environment creates an opportunity for dealmakers to differentiate based on sector knowledge, relationships, and M&A structuring prowess.

Innovation and creativity

How are you nurturing relationships?
People still want to connect, even if it is not face-to-face. I proactively reached out to my inner circle to get a sense of their professional and personal situations. Then I expanded my outreach to a broader network through remote small group meetings and “virtual cups of coffee”. Initiating these interactions reminds people that I am available as a resource.

Have you made any new M&A contacts or clients, or sourced any new deals, during this time?
Given this remote work environment, there is an opportunity to connect with people who traditionally had limited availability to meet in-person. For example, I have connected with industry bankers at bulge-bracket firms, partners at law firms, and other thought leaders who are now more open to exploring expansion of their platforms.

What tools are you using?
Now that most people are getting over the initial awkwardness of virtually connecting, I also have worked to use digital tools much more frequently and effectively. Recently, through Exponent, a women’s networking group I co-founded, we hosted two Zoom conference calls that reached over 200 participants in the private equity community. The success of both events was the result of learning how to moderate a large interactive group while providing relevant and time sensitive content. LinkedIn has also become a more important tool for staying informed on current private equity news. Notably, there is an increase in industry postings from dealmakers and updates from middle-market companies.

What lessons in dealmaking have you learned?
Authenticity strengthens professional relationships. There is a more casual atmosphere on WFH calls and virtual meetings. It has been refreshing to hear a dog bark, or see a child make a cameo appearance. These unscripted acts have humanized and strengthened my professional relationships. Strong relationships matter. During this extremely challenging time, it is evident that people are more comfortable speaking to their closest relationships. Having developed a strong network of relationships over a long period of time has enabled me to connect to more people. Creativity leads to innovation. Virtual calls have provided an opportunity to bring a larger group of people together simultaneously. These meetings encourage sharing diverse perspectives which can generate novel ideas.

What advice do you have for other dealmakers?
Take advantage of virtual opportunities to stay informed. Many investment banks and law firms are having calls with senior experts on topics impacting our industry. Be a connector. Acting as a connector and resource for valuable information and insights is critical as you reach out to people in your network. It is important to remember that communication drives relationships. That holds true especially now when people are experiencing isolation.

Anything else you want to add?
More than I could have known, I miss the excitement of a great conference; wearing my nice clothes, early morning breakfasts, the one-on-ones, drinks with my women “tribe”, and dinner at a steakhouse, even though I am a vegan. Zoom from home, while effective, does not replace being on the road; the airport meal-on-the-run, the frustrating iPhone tracking of my Uber, the friendly handshake of a banker, and the in-person deal discussions that generate new ideas. But more than ever, I appreciate my love of personal networking that has made business development so rewarding. I can’t wait to see you soon.

Weisman was named one of Mergers & Acquisitions' 2020 Most influential Women.