Covid-19 observations from an M&A perspective – What on earth is going on and is now a good time to buy, sell or create?

Time waits for no man

There’s never a right time

Carpe Diem

When you wait for the right time, you’ll never know when it’s already too late

Now is not the time

There’s no time like the present

There are many, many clichés, quips, quotes and words of wisdom when it comes to timing and the truth is, they are all just as right as they are wrong. It very much depends on the specifics of the question, the circumstances and of course, luck or fate (depending on how spiritual you feel today). If only we had the benefit of foresight, hindsight would be a thing of the past.

If your company or industry has been irrevocably damaged by the effects of Covid-19 then as hard as it may be to hear, the best time to sell your company has already passed. If this is true, then Udai Yadla who said, “When you wait for the right time, you’ll never know when it’s already too late” was wrong in one sense and right in another. You waited, the right time came and went, and now you absolutely know for a fact that it’s too late. He was wrong about that but if you’d have taken his advice and not waited, you’d now be telling everyone it was the right advice or at least congratulating yourself for taking his advice whilst you plan your retirement and holiday plans (you might still need to shelve the holiday plans but if not, I can recommend a good specialist tour operator (but more on that later)).

So, what on earth is going on now? No one seems to have a clue, and so surely, now is not the time to try and sell a company, right? Yes? Definitely maybe? No? I will attempt to answer in two parts.

What’s going on?

In 2001/2 “The Dot Com Bubble” eventually burst because in the period between 1995 and 2001 it had become grossly over inflated and it popped or perhaps more accurately, exploded. The same could be said of the Great Recession of 2008, when the mighty “Credit Engine” overheated, it blew a gasket and ran dry, sending pistons shooting through the sump and cracking once mighty cylinders. A “Credit Crunch”. In both circumstances, the problem came from within the bubble or engine itself, too much hot air, too much fuel and an unquenchable thirst for energy that would lead to an inevitable supernova like ending.

It’s now 2020 (I think, I’ve lost track of what day it is to be honest) and every day, hour and minute we are bombarded with headlines telling us the financial times we are living in are unprecedented. Indeed, very soon, someone bright witted financial journalist or politician will come up with a clever name for the recession or depression that is surely upon us or at least headed in our direction like a runaway train. This doom-laden moniker will forever be etched in our minds. Failing that, it might just go down in the history books under its scientific name and be called what it is, “The Covid-19 Recession” or “The Covid-19 Depression” depending how bad it gets, either way, it sounds doom-laden enough to me.

In labelling all this as “unprecedented”, the media do have a point. If they are attempting to label this an economic crisis that is. It is different from the crisis of the 00’s or even the 30’s. The issue did not come from within the markets, a bubble or an engine (in fact let’s call it a system), it came from outside of the system and in that sense, it is unprecedented. It certainly feels like it is.

This “unprecedented” financial crisis came from a mysterious place of myth and legend (that lots of people had heard about, warned about and even tried to shut down) and was delivered in a way that could never have been imagined (apart from the fact it has happened before, quite recently actually and probably will again). It came in the form of a poisoned dart that burst the bubble from the outside, not from within. It came in the form of steam and water that infiltrated the head gasket, causing the engine to implode. It came from the outside. It did not come from within the system. However, it certainly is not unprecedented.

In fact, it could not possibly have come from within the system because it is not an economic virus at all. It is a zoonotic virus.

Just as the Wall Street Crash and the Great Depression came before the Dot Com Bubble and the Credit Crunch, this has happened before. Think the Spanish Flu, Black Death or even World War I and II, “it” has happened before. The virus is different, it’s Covid-19 not Nazism or bubonic plague, but the human toll and financial consequences are likely to be very similar.

So, we must be careful to remind ourselves that this is not an economic crisis it is a tragic human crisis. This awful event will most likely go down in history as a generational catastrophe, just like the major global conflicts or the worldwide pandemics that came before. The Covid-19 Pandemic will be long remembered as a human tragedy not as a financial shock. That is not to say that it won’t have a major economic impact on all our lives for months or even years to come, it surely will, but it will not be remembered for its fiscal impact.

On remembrance Sunday we bow our heads in sorrow and remember those who were lost in battle, not how much the war cost financially, the fact that economies were bankrupted globally or how long it took us to repay the debt. So, right now we should mourn those we have lost and start to rebuild our society first and foremost. It will then require a monumental effort by all to get back to work, to repay the debt and to prosper once again but prosper we will.

After every recession and depression there is a recovery and this trend will repeat itself. The impact of the human aspect of this crisis and the changes it will bring to our way of life are as yet unknown. We have no idea how long it will take before life as we knew it returns, assuming it does. We may need to reinvent the way we live, interact and trade. Almost everything has changed, and we can duck and cower or “carpe diem”. In fact, we have no option but to seize the day.

Our economy was in decent shape before it was badly affected by a human catastrophe. The inevitable downturn will not have been caused by a systemic issue within our economy or the global economy. There will be an inevitable upturn. We will be forced to innovate, to reinvent and to examine everything we do, and it will be hard, but we will recover.

I think we really need to stop thinking of this as a financial crisis and think of it as what it is, a human crisis. After financial crisis of the past we have looked to point the finger (and rightly so). Bankers, stockbrokers, relaxed fiscal policy, lack of regulation, toxic mortgage lending etc. have all been to blame. We were left with the sense that the damage was self-imposed, and the debt must be repaid. There was anger and bitterness and the suffering was not equally shared by the entire population.

Hopefully, if this distinction can be made, we can be more creative with our recovery plans, take more risks and invest for the future, much like we are forced to rebuild after a war or pandemic. We have all suffered and no-one group is to blame. There should be a sense of togetherness in the fight back and the powers that be can be bold so that we can work together to come back stronger. Now is not the time for austerity, we need to throw money and hard work at the problem.

Is now a good time to sell a company, buy a company or start a company?

To answer the question, there’s never a right time to start a business, sell a business or buy a business. Now is not the time to start a business, sell a business or buy a business. This is True and false. It may be the wrong time and it could be the right time, only time will tell. Sorry, I don’t know the answer and anyone who claims to, has probably spend the lockdown in a wine cellar. The question itself is far too complex, as is the answer.

It largely depends on your circumstances and why you are asking the question in the first place but the answer surely must be, that there will always be the wrong time and always the right time, either way you will have to pick a time or you could always do nothing.

Applying some logic and common sense to the decision-making process is often a sensible place to start. Think of it like a decision-making tree, remember the ones we used to see on websites during the great Brexit debate about the possible outcomes if this vote went that way or the other etc etc etc. I can’t wait to get back to that argument by the way! The first thing to recognise is that there are two perspectives to the question; the buyer perspective and the seller perspective. Both are likely to end up at a very different place, but we can get to that later.

There are multiple factors which should influence the decision of when to sell or buy or create and these can be broken down into two major categories; financial & commercial vs. personal. You could then look at lots of sub-categories but rather than this turn into War and Peace, let’s stick to the main ones.

Financial & Commercial;

This largely depends on your business, its performance (current, historical and forecast) and the market in which you/it operate. Taking a couple of examples (again without going into too much detail);

The on-line pharmacy

The market was growing rapidly even before the Covid-19 crisis, it remains fragmented with lots of market share still up for grabs, revenues are up, it is becoming the preferred method of acquiring prescription and non-prescription drugs (especially the embarrassing ones as advertised above troughs in motorway service stations (female readers can have fun guessing what this could possibly be) and more generally, this crisis has taught us that retail businesses are likely to see on-line sales as opposed to high street sales become the new norm. On the flip side competition is starting to heat up and the larger players will soon start to swallow smaller ones either through acquisition or through marketing clout. Taking all this into account, you would certainly argue that now could be a fantastic time to try and sell an on-line pharmacy and valuations should be strong.

The tour operator

A less fortunate tale could be told of any business in the travel sector. So, let’s look at a specialist tour operator as an example and unfortunately, this requires little explanation. Demand is at an all time low and unlike other recent terror related events that have had a very large impact on the sector, this is likely to have a very long-term effect on the market. Demand will return but who knows when and how likely are people to book a holiday of a lifetime for the foreseeable. You would therefore argue that selling a specialist tour operator at the moment is likely to be difficult and valuations are likely to be heavily discounted.

So, those are two diametrically opposite examples of “when is the right time”. In both cases you could still argue that it might be a good or bad time, but those arguments would be more abstract.


Sticking with the same examples and now adding in some hypothetical personal situations.

Let’s imagine the on-line pharmacy was created by two friends in their mid-20’s five years ago in an urban flat share littered with pizza boxes somewhere. One is a qualified medical professional and the other a tech whiz. They have watched an idea turn into a runaway train of a business and they are struggling to hold on to the reigns. So, they look to sell as a way of cashing in but also so they can have a rest and lose the responsibility. That could be a good idea as the business could implode if they try to hold on and they have no managerial or financial experience, but they are now in their early 30’s and they have long lives ahead of them. Will the money they receive for their business be enough and will they ever get the chance to “make it big” again. Might they look back and feel they cashed out too soon. A better idea might be to take investment and partner with a PE firm with some experience, bring in an FD, an MD, maybe a non-exec chairman and some experience. They could then ride the wave for the next five years and end up being the “whale” swallowing up the minnows and cashing out for multiple times the amount they would achieve now. Now could be the worst time to sell but a great time to take investment and re-create.

The management team and shareholders behind the tour operator are in their early 60s and they did not see this coming, no one did. They have built a nice nest egg and can afford to retire. The business is cash rich; they have been prudent all along the way. Terror incidents in recent years such as 9/11 and Sharm el-Sheikh reaffirmed the wisdom of this approach. However, this time could be different, it could be a very long-term problem. They have cash reserves to see them through this year and the next, but they will be drained thereafter, and incomes are currently, zero. The brand is very strong, in fact one of the market leaders and it would be a great addition to any other operators stable. They have a number of cash rich competitors as well as good relationships with other, larger specialist tour operators in complimentary sectors. In actual fact, they have had a number of expressions of interest about selling the brand from these operators, perhaps sniffing a bargain, in the last few weeks. Now could be the right time to sell. They would certainly be selling at the bottom of the market and the valuation for the brands will be heavily discounted however, if they sit tight for two years, they will have depleted their cash reserves, have gone beyond their long-planned retirement age (that was 60) and the last two years will have been, a waste of energy and money. They could sell the brand and liquidate their assets now, whilst they still had plenty of reserves and enjoy their well-earned retirement.

So, although very simplistic arguments, it is entirely possible that the right time to sell from a financial and commercial perspective is now but, it’s the worst time to sell from a personal perspective and vice versa. Of course, if you’re unlucky, it will be the wrong time on both counts and if the gods are shining on you, it will be a win win.

So that’s that, or at least it would be if you could ignore the most important factor, the buyer.

Buyers view;

Your buyer is only too aware of the fact that your on-line pharmacy business has many frailties. As founders, you control everything, and everything depends on you. A lack of investment in management, premises, back office systems and some rather slap dash approach to regulations and compliance means there is a need for substantial CAPEX, and you will need to sign up to some pretty scary warranties and indemnities. Your recent results are also grossly inflated due to a spike in sales during the crisis, and in truth this spike papered over the early signs of a shrinkage in market share due to the rise and rise of a larger competitor. This will have to be factored into the valuation and the deal is looking much less attractive now. Maybe you need to get your house in order first?

Conversely, the buyer of the specialist tour operator is delighted with the purchase. A market leading brand for a fraction of the pre-covid-19 valuation and they are already seeing enquiries from future clients who are willing to take risk and bag themselves a holiday of a lifetime next summer (one of them was a guy who sold his company just before the crisis). What’s more, a number of other smaller operators have closed their doors and as one of the few left in the market, they are likely to see some big gains in client numbers.


So, what conclusions if any, can be drawn. The right time to sell your company or buy a company or start a company is not a binary decision. One must factor in oneself and I would always argue this is the most important factor. One of the most compelling reasons to embark upon a life of self-employment in the first place is that you are the master of your own destiny (apart from having to answer to staff, shareholders, HMRC etc.) and choosing the time that’s right for you personally is an extension of this power. However, financial and commercial common sense (or otherwise) must not be ignored when taking the plunge and lastly, don’t forget to walk a mile in a buyers shoes, it may just alter your own outlook.

Regarding the other “elephant in the room” we partly touched on; the world will recover from this tragic set of circumstances. Some will prosper, some will fight a long hard fight to recover, some will fall but there will inevitably be a recovery, an upturn and who knows, some good may come of this. All we can do is fight, work hard, look after ourselves and one another and be thankful that we have more time. In the scheme of things, the world and its inhabitants have faced far greater challenges and risks.

I saw a cartoon the other day that depicted a dinosaur looking up at a large meteor lighting up the sky as it hurtled toward the earth. A speech bubble above the dinosaur showed the comment “oh no, the economy!”. I thought it added some perspective and, on that note, I will end with an extract from “The Eternal War” by Alex Scarrow;

“In a world turned upside-down, where everything was wrong, bizarre, you could at least look up at the sky and see normality. Stars that shone regardless of who won a civil war, or who should or should not be a president. Their light was billions of years old. They didn’t have a care…”

David Nelson – Managing Director – Leith Mergers & Acquisitions Limited

May 2020

A message to you all:

Firstly, on behalf of the Team at Leith Mergers & Acquisitions, we hope you, your families, friends and employees as well as your businesses, make it through this difficult period safely, To those who have lost loved ones or have seen their businesses suffer, our thoughts are with you and all those affected.

Covid-19 has changed everyone’s future plans and if you are considering your next move post the lockdown, be that in the short, medium or long term and would like to discuss your plans with us, we would love to hear from you.

We are here to discuss your future strategy from a general perspective, even if that’s just a sense check, or your detailed acquisition, start up or exit plans. Contact us today to arrange a free consultation (via phone, video call or in person when the lockdown has lifted).

01306 646890 or [email protected]

Stay safe and best wishes from Leith M&A


For further information please contact David Nelson via email at [email protected]
or call 01306 646 890 in the strictest of confidence.
Leith Mergers & Acquisitions is a family-run business based in Dorking, Surrey. We work with only a handful of clients at any given time, allowing us to provide a personal, proactive and intensive service. We pride ourselves on our ability to deeply understand your needs and motivations in order to secure the future you are aiming for.

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