Exit during a pandemic

Exit plans will have been thrown into disarray for many entrepreneurs by the sudden and devastating impact of Covid-19. Many now face a period of uncertainty just at the moment they had hoped to sell up and reap the rewards of years of hard work.

Corporate finance company Entrepreneurs Hub says that while some buyers remain upbeat and committed to purchases that have already been negotiated, it is impossible to say whether they will finally sign on the dotted line if the crisis continues for some months.

Entrepreneurs Hub Director Andrew Shepperd says: “Strong acquirers are still looking and these broadly fall into two categories: opportunists looking to pick up businesses on the cheap, mimicking activity after the 2008 financial crash; and strong companies taking advantage of the lack of competition to buy very special businesses or those that will help them power through this crisis.”

Changing landscape

And the mergers and acquisitions landscape has shifted significantly, with new ‘hot’ sectors emerging that are related to the pandemic. These include pharmaceuticals, healthcare, healthcare supplies, online ordering, home delivery and distribution, cloud and online businesses, video streaming and electronic gaming.

Malcolm Murray, also a Director at Entrepreneurs Hub, says: “Obviously you are going to have certain types of businesses that are going to do quite well through this period. These are people supplying the UK in sectors such as medical equipment, manufacturing, distribution and supply. But if we look at the high proportion of business owners, they have been significantly impacted over the past two or three weeks.

“If you were planning to exit it is time for damage limitation and what you can do to make sure the business stays as profitable as possible. It is going to slow the market down for a period in certain sectors but we still have buyers saying: We are committed to this. We know it’s a freak period and we are still committed. Of course, what I can’t say, if I’m being honest, is what timeline they will complete the deal in.”

Start contingency planning

So, the advice for those about to exit is the same for all entrepreneurs at this critical moment: don’t panic and understand the situation your business is in. You need to really understand your business and how long your cash will last. Then you can make a contingency plan, whether that means accessing government loans or furloughing staff.

Malcolm adds: “There is a mix of emotions at the moment. Some business owners are afraid. Others are saying they just have to make some hard decisions, and I think that’s the key. Doing nothing is not an option. This isn’t just something that might go on for a couple of weeks. It could go on for two or three months, so you’ve got to take action to protect your cash. We are encouraging business owners to look at their cash flow for the next three to six months and what they might need to do with staff who can’t work.

“We are in unprecedented times – your turnover and profits may take a short-term hit,” he adds. “Stay in contact and maintain your relationships with your customers so you understand their situation and they know you are there for them and will return when the country returns to some normality. Don’t focus on the situation, focus on taking actions to implement a plan to ensure you control costs, maintain cash and longer-term profits.”

Malcolm says that many owners he has spoken to regret not selling sooner and more may consider an exit once the pandemic is past in order to bank any further risk. And for many, the clear lesson that has emerged is the need to maintain higher cash reserves to ensure their companies are as resilient as possible and can weather any storm.

The St James’s Place Entrepreneur Club can help. You can read their insights here or you can book a free hour long virtual session with one of the herd to help you manage the challenges of Covid-19. Please get in touch to find out more.


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This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.