It will be fascinating to see how business will change and respond in the post Covid-19 world. While the nearand lo ng-term impacts will likely differ greatly across industries and geographies, a large number of firms are facing significant revenue, profitability, and liquidity challenges. Might this represent an opportunity for acquisitions and industry consolidations? A look back at the M&A activity immediately after the 2007-2008 financial crisis provides examples to learn from as we contemplate acquisitions in the post Covid-19 world. The nature of these crises and their impact are certainly different. But both give rise to similar opportunities for fiscally secure firms to make strategic acquisitions at attractive prices, whether through acquiring a target with declining financial performance, securing a low multiple, or taking advantage of opportunities fueled by liquidity pressures or timing challenges. Two M&A deals from 2009 offer lessons learned and key considerations for the current market. A strategic acquisition with strong post-crisis prospects Intuit (famous for its QuickBooks and TurboTax accounting software) acquired Mint.com, the three-year old personal finance company, for $170 million in 2009. At the time, Mint.com had 1 million users. Today, it boasts over 15 million users. The motivation for the deal was the fact that Mint.com was a competitor to Intuit’s then Quicken product in the personal finance space, with a strong focus on user experience. Though the public markets and housing markets were down at the time, Intuit recognized that Mint.com was positioned to capitalize on two profitable trends: Coming out of the Great Recession, consumers would be clamoring for a money-saving and personal finance tracking product, and the software market was seeing a shift towards mobile app usage, where Mint.com’s superior user experience and UX/UI design was a big advantage. Lessons from the Mint.com acquisition While the economy overall was down, Mint.com’s niche (personal finance tracking and saving) was conceivably stronger in difficult economic times, increasing consumer demand for these tools. The 2009 Mint.com acquisition suggests two key considerations when weighing acquisition opportunities in the current M&A market. 1. Are there niches or revenues that are similarly safe from broader economic difficulties? Perhaps products that are safer or more conducive to social distancing that will provide a competitive advantage going forward. Several types of businesses might include:
- Delivery businesses: companies that do not rely on in-person or on-premise interactions.
- Streaming or virtual entertainment: content consumable from a couch as opposed to in-person at a large venue.
- Remote services: while pre-Covid there remained some objection to having third-party providers that weren’t “local” (think marketing firms or certain consultants), in a post-covid environment there is likely going to be a weakening of this desire to meet face to face.
- Software: specifically productivity software, from ERPs and CRMs to project management tools and virtual communication tools. These types of companies were already gaining significant traction over the last decade, and the Covid situation should only accelerate business’ interest in the broad range of productivity software.