Monica Weaver acquired TGI Direct in July 2020. It was her first acquisition and she had been working on the deal prior to the pandemic, since around the fall of 2019.
“We were on our way, going through the normal due diligence process,” she says. “And as COVID started to happen, things slowed down with the seller because he had to then shift and focus on what to do with his business — what are you supposed to do in this environment? How do you keep the clients going? How do you keep the employees healthy?”
That, she says, was an additional weight on the seller's mind. But the seller wasn’t the only one distracted from the deal by the pandemic. She says the banks had to stop and shift their focus on PPP loan applications. So the deal proceeded in stops and starts, moving forward when everyone could.
One additional element had to be added to due diligence because of the pandemic: re-due diligence. The disruption led the buy-side team to take another look at certain areas to ensure that the business was still able to function and maintain it cash flow in spite of the pandemic. And that added to the timeline.
Bill Rosin, Dickinson Wright PLLC member, was involved with the TGI Direct transaction. He said COVID was an unknown, so it wasn’t clear how long it would last or how it would affect the business. That meant the buy-side team really had to re-evaluate the business.
“All the numbers, all the working capital, all the computations, you’ve got to remodel it based on a potential drop in significant business,” Rosin says. “So, things like purchase price adjustment indemnification and all those items, you really had to work through.”
One advantage Weaver saw in closing during COVID is that she was able to see how the company managed to survive during an incredible disruption.
“I was very happy that it happened at the time that it did and it didn't happen right before COVID, because then I would have been scrambling not only trying to learn a new business but trying to figure out this pandemic and how would that impact the business that I had just bought,” she says.
Weaver and Rosin, along with Emagine Entertainment Chairman Paul Glantz and Huntington National Bank Regional President - Southeast Michigan Eric Dietz, spoke at the recent Detroit Smart Business Dealmakers Conference about adjustments buyers should make when acquiring a company during disruptions such as the pandemic. Hit play on the video above to catch the full discussion.