Bass, Berry & Sims attorney Michael Holley authored an article for Industry Today discussing challenges for mergers and acquisition transactions in the manufacturing space amid the COVID-19 pandemic. Michael highlights ways the pandemic has affected each aspect of a transaction – from launch of a process through diligence, terms negotiation, and deal closing.

Travel restrictions and limited accessibility to facilities has made it more difficult for buyers to physically inspect a facility when beginning the process. To overcome this, sellers are relying on video walk-throughs to provide in-depth coverage of the manufacturing process, general condition of the facility, and product demonstrations. Buyers are also relying on flexibility from sellers to allow diligence teams time on-site while still ensuring the safety of those teams and the facility’s workforce.

Beyond the physical challenges, the impact of COVID-19 on manufacturing businesses has created new challenges for financial assessment. These include a buildup of inventory due to reduced sales across the country as well as issues stemming from sellers’ usage of PPP funds and related compliance obligations. Accurately valuating businesses and projecting future performance has also required changes in how deals are negotiated, such as deferring some portion of the purchase price and conditioning the payment on the post-closing financial results returning to pre-pandemic levels.

The full article, “M&A in Uncertain Times,” was published by Industry Today on July 2 and is available online. Michael recently moderated a panel discussion and webinar with other industry leading professionals, “COVID-19 M&A Environment: Manufacturing Dealmaker Perspectives,” which is available to download here. Click here to read key takeaways from the webinar.