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Amid all the gloom, it is worth remembering that the only constant in life is change, and while we will awaken from the COVID-19 nightmare to a very changed world, much good could emerge.

Crises tend to accelerate already existing trends and make space for the new. This one will cull companies that were not future-fit and create the conditions for those that are to flourish.

The culture of entrepreneurialism already so strong in ASEAN (Association of Southeast Asian Nation) will be the engine room of further growth. Post-pandemic M &A activity is likely to go off the charts.

Asean's M &A activity is likely to go off the charts
Post-pandemic M &A activity is likely to go off the charts

But it is also the case that rapid change can lead to poor decision-making and expensive mistakes. Never is this truer than when buying or selling businesses, which is ironic given the seriousness of the occasion. Sell at the wrong price, or buy a company that isn’t the right fit, and the consequences can echo down the generations.

Impressions are key

In the new environment, many people will see the time is right to sell a business and crystallise – and enjoy – the wealth their hard work has generated. Here perception will be critical. Buyers may wrongly believe that you are a forced seller and try to knock you down to fire-sale prices. If this seems to be all that is on the table, you might be tempted to accept low-ball offers: don’t. Instead, make sure that professional long-term valuation models are used so that the total value of your business is baked in.

This needs to include recurring revenues and assets and the more intangible elements of value such as the expertise of any staff staying on, brand power, and the goodwill of clients and partners. Don’t discount anything that a buyer will leverage off to build on your success.

On the flip side, don’t try to cut corners when it comes to tax. So many times, I’ve seen buyers spend incredible amounts on lawyers and accountants who say they know workarounds. It would have been far more straightforward and very much cheaper to adhere to government policy and pay what is owed when it is due.

There is such a thing as trying to be too clever about such things.
That’s not to say you shouldn’t approach M&A deals intelligently, of course, just that you should direct this in the right direction. And often true wisdom is about having the humility to admit what you do not know – or at least not sufficiently well to get the very best deal.

Don’t go it alone (but also not with a crowd)

There is a reason that nobody in the West attempts an M &A deal without a specialist advisor fighting their corner, and I mean that in the singular. I often see buyers and sellers of businesses engaging multiple mediators who promise too much and deliver very little. With scant professional reputation at stake, they say anything to try to make a commission.

If you sell at the wrong price to the inappropriate buyer or purchase a business that isn’t in reality what it seemed, what do they care? Trust instead to professionals who have skin in the game.

Find an adviser with integrity and proven experience in significant M &A deals, and you can trust your future to them and them alone.

Unpicking businesses’ prospects and brokering deals are highly involved processes, but a firm can only commit to you as much as you commit to them.

You can significantly undermine the value of a sale by engaging lots of different parties to work on your behalf (an impression of desperation is never a good look).

And on the flipside, seeming like you are flailing around for just anything to buy marks you out as someone who could be taken advantage of.

Business discipline

A business might be all about numbers, but my decades of experience have taught me that impressions and intangibles matter, just as much – and often very much more.
Yet as all good business people know, relationships and reputation are essential. At every stage of the business cycle, choosing the right partners will not only make your life easier, but it will also doubtlessly make it very much wealthier too.

The post-crisis world will be incredibly fast-moving, meaning that maintaining business discipline will be vital. There will be those who fight against a Western model of transparency when buying or selling a business but rest assured they will be the losers long term. Do things correctly, and you only have to do them once. Buyer beware, as we say back home, and all the sellers coming to market too.

Brian Spence – HSP Consulting