No matter where you live, you’ve heard about the new strain of coronavirus (COVID-19) that is wreaking havoc on a global scale.
Today, I want to give you my expert take on how this pandemic will change the dealmaking landscape…
And how you can benefit.
Now, I want to be absolutely clear. I am not a medical professional.
I have my own thoughts on the current outbreak from speaking to several medical professionals who are friends of mine…
But I’m not here to voice any opinions on the medical aspects of it. It’s too early to say what will happen – and the forecast changes hourly.
As dealmakers, on the other hand, I know how we can deal with the issue.
I would be lying if I said there won’t be some short—medium-term economic challenges in some sectors.
It’s obvious the travel and hospitality sectors will feel some pain due to a lack of traffic… but you know I don’t target those businesses for deals anyway.
I prefer business-to-business – or B2B – deals. Businesses that sell products and services to other businesses.
Like engineering businesses…
The temporary shortage of cheap imports from China (since most of the country is still locked down) will force larger U.K. and U.S. businesses to source products locally. That will increase revenues for those smaller businesses.
The stronger reliance on locally produced goods in the short term will also drive revenue in the transport sector. And as long as oil prices are falling, distribution will become cheaper, thereby increasing profit margins.
Software and IT businesses in the U.K. and U.S. may also see an uptick in business, since India (the global hub of offshored technology development and services) is on lockdown until April 15. All IT professionals there are homebound.
Professional services firms – like public relations, marketing and advertising agencies – may get a little busier as their corporate clients communicate their responses to this global pandemic.
Retailers both large and small may also see a temporary spike in revenues as consumers buy food, cleaning products and other essentials in bulk.
I read earlier today that the U.K. is about to run out of toilet paper – WTF??
Good news if you own a paper mill, I suppose.
Online businesses will likely see the most upside. People won’t want to travel to shopping malls or large supermarkets. They will order more products online.
All this is to say…
There are opportunities out there for most businesses to pivot and get through the next couple of months. Then, hopefully, we can all get back to normal when warmer weather arrives.
A top U.S. health official told reporters that clinical trials for a COVID-19 vaccine could start within weeks. If the virus returns in the fall – which medical folks say is likely –an annual flu-type shot will hopefully keep the vast majority of us safe and healthy in the future.
But what does all this mean for doing deals?
First, central governments are slashing interest rates, so debt will be less expensive to finance. That’s fantastic! Post-deal cash flows will increase as a result of the cheaper debt.
And I fully expect an avalanche of new deal flow coming to market in the next few months… and lasting several years.
Sellers don’t like uncertainty.
Which means now is the time to strike.
I have seen this happen multiple times in the past 27 years… After the global financial crisis in 2008, for example, tons of businesses came to market.
I know – because I was buying them in droves.
The SARS virus and Brexit also previously disrupted business owners’ psychology– forcing them to the table and driving up deal flow in both in the U.K. and U.S.
The recent changes to the U.K. capital gains tax will drive deal supply even more. (More on that later this week.)
Uncertainty leads to haste. And when people panic, they start looking for an exit. You just have to be there to provide the safe pair of hands – and an escape plan.
Health issues aside, the coronavirus won’t stop you from being a dealmaker. It will only increase your odds of success, providing you DO THE WORK.
So get to it. Grind on. Today’s opportunities wait for no one.
Until next time, bye for now.
Editor and co-founder, Dealmaker Wealth Society
P.S. Finding deals is an ongoing process… which is why it’s critical to build a healthy deal-origination pipeline… so you have a constant stream of high-quality deals that are ready for you to strike while the iron is hot.
For my money – the iron is PIPING HOT. Right now.