The Covid-19 Effect 2020: The Year That Was

We are living in a lost year.

I have been associated with the buildings services industry for many years, first as a founder and owner of an operating company. Later, after selling that company, I founded an M&A intermediary firm with exclusive focus in the building services industry. So as an observer, I have some comments about this industry as it relates to covid-19.

Most of us will welcome 2021 as an opportunity to make things right again. However; we may find that 2021, while better than 2020, may be a bridge year, i.e., better than 2020, but still with the lingering effect of 2020.

Regardless of our profession, the Covid-19 Effect has influenced our lives and feeling of well-being, profoundly. There is a pall hanging over America and the rest of the World. We sense it at work, at home, in school and in our everyday interaction with others.

Add to that, the sometimes vicious political battles, a feeling by many that America has a do nothing Congress and that we are enduring unprecedented urban violence. Will we ever return to normal, whatever that is, or should we prepare for a new normal, whatever that will be?

In our professional lives, life is different to varyingly degrees. Many are worried that our jobs will disappear. For some fortunate few, the changes are minor. Others are still without employment and don’t know if their former job will be available. There is worry about future generations and the impact on them.

As with other aspects of life in America, business, in general, has and is changing. The buildings services industry, an $85 B industry in America, has been evolving since its inception; however, the covid-19 has accelerated the evolutionary process. I don’t know if the changes will back-track a little, or whether the changes are here to stay. Soon, we’ll know.

Speaking with those in the industry, I hear some tales of woe, yet others are delighted with the changes that they have experienced. Some report that, while gross revenue is down, profit is up. To some extent, I think that the market sector in which one operates has a bearing on whether one’s experience has been positive or negative. The USA market should not be viewed as one market area; it consists of many distinct market areas. Add to that the variances among the many customer market sectors, and that can partially explain the variance of experience as a result of covid-19. 

The buildings services industry has not only evolved, it has evolved with improvement. It has grown; and the prospects for that trend to continue are good. Why is that? Part of the answer lies within the entrepreneurial spirit of those engaged in this huge industry. Those engaged in the industry since inception, have always been able to deal effectively with change and have been able to adapt and improve at the same time. Low negative impact during past crises and recessions are testament to the industry’s strength and resilience.

There is no doubt that America has been in the throes of a recession since mid-winter 2020; however, this one is different. The financial contraction was induced and was precipitous, causing financial mayhem in some industries, but not necessarily all. Personal services companies and restaurants were affected more than others. Buildings services companies, while affected, seem to have kept their balance through ingenuity and attacking the situation head on. The industry is deemed by many to be essential, so it was not locked down. Where usual services were reduced or discontinued, other services took their place. Overall, with some exceptions, the industry has fared quite well. 

If the short-term effect in the M&A sector of the industry is any indication, valuations for buildings services companies will not suffer any long-term negative impact, at least that is my thought now.

Because of the uncertainty and travel restrictions, some transactions that were caught in mid-stream were delayed, but by now, most have gone on to a closing. The industry continues to live up to its reputation of being vital, resilient and recession resistant.

We are living in very unusual times. We are plagued by a deadly virus, witnessing our cities being turned into combat zones; and seemingly, having our local, state and national legislatures internally at odds, drawn along political party lines. Some may call this, “America’s perfect storm.” If America’s history is any indication, the American nation will emerge scathed a bit, but still a great, if imperfect nation. 

As I write this during mid-September 2020, I think that things are beginning to look up. Mask wearing has become a fashion statement and people are beginning to venture out to restaurants and are socializing, while still maintaining the social distancing protocol. Some are wondering out loud if the overall covid-19 response was the proper course to follow. Time will tell.

I believe, based on my observation of the industry; that the building services industry will not only survive, but will thrive, in spite of a few casualties along the way. Supported by what I am seeing now, I believe that enterprise valuations will hold to pre covid-19 levels, in spite of a temporary slowing of the transaction pace; that I think is a result of some overall uncertainty about world and national events.

As 2020 moves forward and with the national election behind us, soon we’ll all be able to say: “that was the year that was.”

Stay Tuned!

As always, I will appreciate your comments, whether in agreement with what I have written, or if you see things differently. There is always room for thoughtful discussion.

Gary Penrod 

?Gary Penrod and Associates, Inc

www.garypenrodandassociatesinc.com 

[email protected]

843 290 3574 (cell)

843 645 1937 or 843 681 6588 (office)