In the current COVID-19 reality, we are navigating a fluid M&A market from the front lines to help our clients succeed in this evolving scenario. While the M&A activity in exposed industry segments has been devastated, M&A activity in certain segments continues to be active. Each industry segment has multiple aspects effected differently by the consequences of the pandemic. For example, digital ticketing software companies, who are dependent on public events, are experiencing a sharp decrease in revenue making it a buyers’ market. However, companies providing security software products, supporting the transformation to a remote workface, have been experiencing strong increases in demand.
In order to properly guide our clients through these times, we are actively monitoring the segments like SaaS, that our four investment banking industry practice groups cover (Tech, Healthcare, Consumer, Business Services). Here are a few of the sectors we cover experiencing strong continued M&A activity.
Fertility Services – Healthcare Practice
As many reproductive practices in the US are effected by The American Society for Reproductive Medicine (ASRM)’s guidance on fertility care during the COVID-19 pandemic, it is clear that most fertility practices in the US will be significantly impacted in April and potential through June and July.
However, the macro trends of the industry including changing of social norms to begin a family later in life, shifting employer-sponsored insurance policies to include fertility services, and overall technological advancements are projected to continue to support the strong growth of the industry. Objective’s Healthcare & Life Sciences Investment Banking Practice is observing that Acquirers who were active in the sector prior to COVID-19, are continuing to express strong interest in pursuing transactions based on their perceptions and projections that the fertility centers will bounce back quickly after the COVID-19 period, and benefit from pent-up demand and growing customer base. One aspect we are actively watching is how Acquirers will adjust valuations for the one-time profitability drops occurring in the COVID-19 period. Acquirers may find that the attractive macroeconomics and acquirer competition characteristic of the fertility services sector encourage them to overlook this unique period when using the typical multiple of earnings based valuation method. Should this hold true, we expect to see M&A transactions in the space continue to occur during 2020.
B2B SaaS – Technology Practice
While many active acquirers of SaaS companies paused for a few days in mid-March to reconfigure their teams to a remote working environment, Objective’s Technology Investment Banking Practice is observing that a number of the SaaS companies whom we are advising in their sale are not experiencing a material impact on their M&A transactions. The common characteristics of these particular SaaS companies is that the solutions they provide are either deeply integrated into the workflow of their B2B customers or serve customers in industry segments not directly impacted by COVID-19. For example, SaaS companies targeting the insurance services segment don’t appear to be experiencing any material slowdown or decreased Acquirer interest, unlike the B2B ticketing software solution providers mentioned previously. While the economic normalization that may emerge from this current global crisis may dampen the growth of B2B SaaS companies’ customers, over the next few years we expect that the reoccurring revenue streams which are a fundamental characteristic of B2B SaaS companies will remain an attractive and desirable asset.
DTC Ecommerce – Consumer Practice
Objectives’ Consumer Investment Banking Practice is observing a wide range of COVID-19 impacts on direct to consumer (“DTC”) product companies. Certain consumer product companies, for which higher-margin DTC is a significant sales channel, are greatly benefiting from the increase in E-Commerce spending which is offsetting the sharp degradation of sales through retail channels driven by COVID-19 isolation mandates.
With shelter in place mandated keeping a material portion of US consumers in their homes, DTC product companies who’s products are contextual fits with this new reality, such as in-home exercise equipment, have expected a substantial increase in sales volume. The unfortunate flip-side of this trend is that we are observing a number of consumer product companies, who’s products have become less aligned consumers’ immediate contextual needs, such as skin care, weight loss products, and travel products, have experienced dramatic decreases in sales volume.
For companies able to make inroads with new customers and increase their market presence, the option for M&A in 2020 should remain strong. For companies who’s products have become temporarily less in favor with consumers during the COVID-19 period, 2020 will be a year to shelter in place positioning them for a future exit or a year to strategically pursue opportunistic cash-light acquisitions of competitors.
We’re Here To Help
In this dynamic environment, we are here to help business owners to assess their company’s unique situation and make decisions that position them to achieve a compelling sale of their company in the current M&A marketing or position themselves for a premium exit when their segment has rebounded from the impacts of COVID-19.
Whether you are interested in gaining insights into Acquirers’ appetite for your company or understanding valuations in your segment, the leaders in our four investment banking practice groups (Tech, Healthcare, Consumer, Business Services) are here for you.
Contact Our Team of Experts
Trever F. Acers, Managing Director Channing Hamlet, Managing Director
20+ Years of Experience 25+ years of Experience
David H. Crean, PhD., Managing Director
45+ Years of Experience
About the Author:
Trever F. Acers
Managing Director, Objective Capital Partners
20+ Years of Experience
This news release is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Securities and investment banking services are offered through BA Securities, LLC Member FINRA, SIPC. Principals of Objective Capital are Registered Representatives of BA Securities. Objective Capital Partners and BA Securities are separate and unaffiliated entities.