Ron Ekstrom, a senior George & Company advisor had a couple of calls with lenders the other day. The usual thing - how are things going, do you have any deals that need financing, etc. So, the advisor asked the next logical question: how are you, the banks, going to deal with the obvious problem that most businesses will have that sell their company from this point forward - will the banks punish sellers because of a down quarter or two and push valuations down?
The answer was very comforting.
Here was the consensus:
The more conservative banks WILL finance deals this year so long as they see a bounce/turn-around in the numbers. They don't have to fully go back to 2019 performance, but they want to see that there's a bottom and your business is making that turn towards returning to normal.
The more aggressive lenders said, depending on the industry, that they will use historical data as the guide and if you're in one of those industries not greatly impacted by this pandemic (try to find one of those), they will finance the business right now with no problem. If you are in industries like restaurants, entertainment, hospitality, even they will need to see that society is returning to normal.
A more concreate example is the long-term care industry. We are not seeing an issue when it comes to long-term care financing even though there are state mandated "no visitor" rules. The most important factor in that business is safety. That population is at greatest risk so a ban on visitors is smart and will keep the residents healthy and safe. Having tours, inspections, visits by buyers cannot happen right now, but with the right presentation of the business (via CIM, CBR, etc, the "marketing" document) we can still market the business for sale without too much issue.
We suggest that if your business is one significantly impacted by this issue that you take a "pause for the cause" and focus on yourself, your employees and get prepared for that day when the world returns to some sort of normalcy. At that point, there will be a plethora of pent up demand and that includes those looking to buy businesses.
During this down period you may be experiencing, it might make sense to talk to an advisor and map out a strategy moving forward, especially if you are within a year or two of wanting to exit your business. If you plan correctly and do "it" right, you'll maintain the best possible value for your company. Don't plan and let the chips fall where they might, and you could waive "bye-bye" to possibly the biggest asset you own.
For a confidential consultation with one of our advisors, visit www.georgeandco.com or call us (508) 753-1400.