Deal flow has certainly been constricted by the COVID-19 pandemic. Whether a business has been deemed essential or not, there's just so much for operators to do to stay up and running, and a lot of uncertainty as to what the future holds.

"Some of the folks that we represent on the buy side are really more focused on their own business right now," says Paul Mattaini, a partner at law firm Barley Snyder. "Private equity firms, as buyers, are dealing with their portfolio companies for the most part. They would look at an opportunity, but I think right now they're spending most of their time helping their portfolio companies."

On the sell side, many sellers are waiting.

"They're not going to be selling for a while," he says "If they're being priced off an EBITDA multiple, they're not going to be as strong, so they might delay that."

Mattaini spoke with Smart Business Dealmakers about the state of dealmaking — both from the sell side and buy side — and his sense of what M&A will look like in the short term.


Fed up with uncertainty

While some sellers might be holding out for a better price down the road, there's a chance some companies may decide to sell sooner than later because they're tired of the uncertainty.

"They've said, 'I don't want to go through this again,'" he says. "'And if I perform pretty well, I may be one of the more attractive candidates as a seller.'"

Mattaini says he saw this happen at the tail end of the last downturn, around 2010. That’s when a client that was doing well through the downturn got a lot of interest and a very high multiple as a result.

On the buy side, this sentiment from sellers — that they're over the uncertainty — may create a lot of opportunities for strategic buyers, possibly more than before the pandemic.

"There may be people, competitors that have been weakened, that they're able to pick up at a reasonable price and become stronger themselves," he says.


Seeing the reaction

When it comes to diligence, people are finding new ways to interact. And while Mattaini expects some of that will continue, even when in-person meetings are again commonplace, there's always value for dealmakers in seeing the other party. Whether it's across the table, or on a teleconference, dealmakers want to read body language.

Buyers — private equity, for example — want to get a good feel for the people who are going to be running the company they acquire. Of course, diligence can, through data, reliably reveal the results the company has generated in the past. But there's a comfort factor that's a big part of a transaction that's been challenging to replicate given the restrictions.

"Will this deal get signed during the time where we're still social distancing? Or will they wait and say, 'OK, we're just about ready, but we're going to wait until we go out there and see the facility, see the people, in person?"