Four Takeaways on M&A in the Pandemic

As private investment firms, strategic investors and investment banks plan for M&A in 2021, at DealCloud, an Intapp Company, we’ve been actively thinking about how the events of 2020 have changed the way these various players go to market. We’ve helped experts implement and lean on technology in their remote work, but as we enter this next stage, we’re listening to our users to hear what capabilities and efficiencies we can add to best support their work.

That’s one of the reasons why we recently sponsored a live webinar moderated by David Rubinger from the Atlanta Business Chronicle, who spoke with:

·      Stockton Croft, Founding Partner at Eagle Merchant Partners

·      Jonathan Goldman, Founding Partner at Genesis Capital, LLC

·      Lindsay Weaver, Senior Director of Strategic Business Development at The Home Depot

Here are my four main takeaways:

1.     ‘Skate Where the Puck is Going’

If 2020 taught us anything, it would be the critical need to prepare for obstacles – no matter how abstract – that may approach us in the future, in both our personal and professional lives.

For Lindsay and Home Depot’s corporate development team, they’ve quickly become the fifth largest e-commerce business in the U.S., by investing billions of dollars to create a seamless experience for customers across physical and digital channels. Making key investments in technology, supply chain infrastructure and store development has set the company up for growth both organically and by acquisitions – enjoying ‘Black Friday-level’ sales on a daily basis and ultimately recording $15 billion in growth during the first nine months of 2020.

On the private equity side, Stockton and Eagle Merchant are future proofing their portfolios via new investments and exits, when leadership deems the timing is right. While Eagle Merchant is generally focused on the consumer and industrial sectors, the pandemic has encouraged the team to build out their portfolio tangentially into high growth areas. By going off-site twice per year, the team dedicates time to identify at least two industries that are benefiting from macroeconomic tailwinds.

A common thread among the three executives surrounded the need to make significant investments in company culture in order to attract and retain talent. I cannot agree more. Workplace culture has never been more important, and our flexibility in work settings should not change once a vaccine is available and the pandemic ends.

Workplace culture has an impact well beyond the wall of an office or team Zoom meeting. As Lindsay mentioned, talent and people drive Home Depot’s decision-making process when choosing an M&A advisor.

2.     Sometimes, You Just Get Lucky

The pandemic brought shock to global economies, mature and emerging markets alike, causing executives to make business decisions that will be questioned or praised for years to come. But sometimes for the latter to happen, you’ll need a bit of luck.

It doesn’t get much more fortunate than Eagle Merchant’s sale of fitness business, United PF Partners, in December 2019, just a few months before the pandemic struck. As the portfolio company approached $100 million in EBITDA, the deal team figured it was time to sell as the universe of buyers for such a large, growing business was becoming smaller and smaller.

Similarly, Lindsay said Home Depot struck the “deal of a lifetime” when it acquired HD Supply in November, adding a leading national distributor of maintenance, repair and operations products to the corporate umbrella. The team creatively found ways to visit physical sites safely, and gain firsthand perspective on the culture they were linking forces with.

3.     Virtual Work Isn’t So Bad

All three panelists agreed that remote work has forced deal parties to be more efficient.

Before the pandemic, Jonathan and Genesis Capital placed an emphasis on building the firm’s technology infrastructure for disaster protection, so once COVID-19 struck, they had the time and ability to facilitate some next-level workflow efficiencies they’ve been discussing internally for several years. When it was their turn to advise an acquisitive company and use new technologies remotely, they were ready.

By relying on technology like our very own DealCloud, the firm successfully advised Spectrum Brands through its acquisition of Omega Sea, a fish food and nutrition company, just 30 days after the World Health Organization (WHO) declared a global pandemic – despite initial questions of whether to stall deal conversations due to the pandemic. Jonathan said the firm could have slowed the process, but ultimately moved forward because the involved companies’ core values were a match and his team believed it was a fantastic acquisition for Spectrum Brands, regardless.

Stockton was personally surprised how effective video calls had been and Lindsay said, since bankers relied historically on phone calls, it was nice to finally put a face to bankers’ names on video calls.

But, where needed, some acquirers visited companies and their facilities safely. As Stockton mentioned, it’s a necessity to ensure work styles of the CEO and management team fit the acquirer – and video calls aren’t as effective in determining that. After all, Stockton’s team was able to close two platform investments last year.

4.     Engage Seamlessly with All Deal Parties

As we do for our DealCloud clients, it’s common sense to prioritize the needs of the end user – and other parties involved along the way – when making a deal or implementing any business-specific adjustments.

On the private equity side, Eagle Merchant structured a different type of deal recently – coming in as a lender to Code Ninjas because they were having trouble agreeing on a valuation. But on a day-to-day basis, the firm treats it as an equity investment, bringing in a new CEO and helping the company innovate to capitalize on macro trends.

The best dealmakers, like our panelists, are the ones who best maintain strong relationships with other deal parties, and keep an open mind.

To help capital markets professionals engage with multiple stakeholders, we’ve scrapped the sales-focused relationship approach that generic B2B CRMs tend to use. For example, following a conference call with advisors, a sponsor and legal teams, users on our platform benefit from a flexible object model that allows the linking of contacts, and anything else they may want, in a single, automated entry.

DealCloud is purpose-built by dealmakers to meet not only the needs of dealmakers across capital markets but any intermediaries or third parties along the way.

To watch the Atlanta Business Chronicle webinar, click here.

If you’re facing some of the pandemic-induced challenges mentioned by the panelists on the webinar, feel free to reach out and perhaps my team can find a way to help.