Strategies for Bridging Valuation Gaps in M&A in the COVID-19 Environment

In the wake of the COVID-19 pandemic and its continuing impact on global financial markets, executing M&A deals at the right price has, almost overnight, become more challenging than ever. This OnPoint explores certain strategies to bridge valuation gaps in light of the ever-changing economic landscape, including classic earn-out mechanisms, the increasing prevalence of toe-hold and minority positions, and other valuation trends observed in the Asian markets in the early days of the Coronavirus outbreak.

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Implications for Due Diligence

Although deal volume has already started to decrease as a result of the impact of COVID-19, some sale processes remain ongoing (particularly those in certain sectors such as technology and which do not require any third-party financing). As a result of the measures put in place globally to control the spread of the virus, it is important that Buyers are asking relevant questions of their targets (and Sellers of their portfolio companies) to fully understand how they are dealing with the current situation and their plans to mitigate any delayed impact that it could have.

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COVID-19 Coronavirus Business Impact | Private Equity

To help you quickly navigate the various challenges and opportunities arising from the current environment, thought leaders from our global private equity practice have developed a broadcast series to succinctly share their insights on the key issues on the minds of our private equity clients. To listen to episodes from the series, or for more information and guidance, please refer to Dechert’s COVID-19 coronavirus resource page, or the Dechert lawyers with whom you work most closely.