UBS Managing Director and Market Head Jerry Johnson is hearing a lot from clients today. And while what he hears depends on the type client — business owner vs. retired investor, for instance — there are some similarities.
"What clients are looking for is real intellectual capital and content, not just opinion," he says. "What’s going on with COVID? What should I be doing right now? What's the view on the market? What’s going on in Congress? It’s about as broad as I’ve experienced in the 35 years I’ve been in the business."
Johnson shared his view of the market, and what he’s hearing from a range of clients, recently on the Smart Business Dealmakers Podcast. But his insight on capital flow in the M&A space is particularly relevant to dealmakers.
There are deals to be made
M&A is still alive and active, according to Johnson, especially with private equity players. He says a lot of what was driving activity on the M&A side — the amount of capital being held by and available to private equity — is still there and is a factor.
"I don’t think that money has been severely impacted by what’s happened here,” Johnson says. “In a lot of cases, a lot of private equity funds are looking for business opportunity."
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That opportunity, however, is being redefined. Johnson expects there will be a lot of re-evaluations of businesses, resulting in some being bought at lower valuations than what they would have gotten had the deal been done before this crisis.
The focus for owners right now should be on planning well ahead of a sale and connecting with partners who can help enhance the value the company. Owners should also consider their personal goals so that they’re in the best position when the sale goes through.
"We’re spending the majority of the time looking at those things, finding the right buyers or helping them find the right buyers, helping them do the things to enhance the valuations that have been as high as I’ve seen probably in my entire career," he says.
Capital is flowing
Johnson says that there’s capital available for M&A out in the market, but there will be more attention paid to business analysis, with the aim of settling on new valuations. That could affect the type and structure of deals.
"I think you’re going to see some restructuring, some renegotiation with lenders, some new capital-raising solutions, whether it's bridge loans or recaps or, in some cases, rescue plans,” Johnson says. “I think we’re going to be experiencing maybe some distressed M&A opportunities out there that we need to help and counsel and advise on, whether it’s some 363 sales or some noncore assets sales."
While activity in the short term may shift a bit to focus more on business continuity or business rescue, or firming up values, there are still deals to be made.
"I think the deal flow is there,” Johnson says. “I think it’s going to hit the valuations probably more than the flow itself. It hasn’t stopped, for sure."