Does Pandemic = Lost Value?


I have been a bit quiet these last few months as we have been crazy busy here at Legacy Partners, and to top it all off, now we have a threat of a pandemic.

In light of this new twist in the economy I’m fielding questions regarding the mergers & acquisition market and the value of your business. So, let me answer the three most common questions I’ve received about Legacy Partners and the economy as of late:

1.    Has Legacy Partners moved their office?

No, Legacy Partners, LLP has opened an office in Sarasota, FL. Thus, the reason for my silence. Not only is the weather a tad easier than the Northeast on our travel, but the favorable business environment and lower taxes, made it an absolute must. You can check out all the great reasons to have a business in FL here. We also have several key strategic partners located here in FL that encouraged our expansion. We still have our offices in Boston, MA and Dorset, VT.

2.    Is the COVID-19 threat going to destroy the economy?

Those of you who have heard me speak at an association meeting, conference, or teach at Harvard, know that my answer is: “I don’t know, but I do wish I had a crystal ball!” I will say that I am just as surprised as anyone by this new virus and had no foresight of a pandemic being the cause of a correction. As mentioned in previous blogs, we have an enormous amount of debt on a global basis. With supply chains being disrupted around the world and the potential of the virus reaching pandemic levels, our debt-ridden global economy could create a global recession.

Would a correction be deep and long? Or shallow and short? Again, I need a crystal ball to answer that question. The ten- year treasury yield is hovering around 1% and the two-year treasury .84%. Last summer the ten-year to two-year yield inverted. Inversions in the yield curve historically have been an indication of an impending recession.Typically within eighteen months. The Federal Reserve executed an “emergency” half-point rate cut yesterday to thwart off any potential economic disruption. The central banks around the world are positioning to react too.

We can’t control the virus or the global economy, but we can control our reactions. Always be sure your portfolios are balanced to your risk tolerance and be proactive in the face of disruption. The same with your business! The silver lining of the Coronavirus (and I always believe there is a silver lining) is that in every disaster we learn how to prepare for the next. How will tech play apart in pandemics? Read here.

3.    Is the value of my business being impacted?

A correction in the stock market always triggers fear but recognize the stock market values public companies. The value of a privately held company is gauged by the level of transferable value which translates into the ability of a business to produce future cash flow for an investor.

Value placed on a business by an investor is driven by supply and demand dynamics and cash availability, cost of capital, and confidence.

·     We have tremendous cash available that is fueling the current mergers & acquisition market. We actually had a client recently ask, “why is this PEG paying so much for my company?” The answer: Market conditions.

·     Cost of Capital is cheap and getting cheaper by the minute it seems thanks to Jerome Powell and his crew.

·     Confidence can slide the quickest and take the longest to get back. We are in a very dynamic global economy and an election year. Consumer confidence drives our economy and they can be fickle. Stay tuned.

I’ll chat about supply and demand in my next blog.

These are all good questions. In the end, I vote not to worry. Be prepared for disruption, wash your hands and run your business as if you will run it forever but be prepared to exit on a dime!

Keep reading:

An Exit Strategy is Good Business Strategy – Why You Need a Plan Today!

An exit plan aligns an owner’s business, financial, and personal goals and is a living document, so it is continuously revised as the business scales. It serves as a guide for the business owner as they prioritize critical decisions to scale the company. This ensures that as the company grows transferable value is increased and the business will attract investors when they go to market.

Read More »
who will be my buyer?

Who Will Be My Buyer?

There are three types of third party business buyers – financial, strategic and individual – and each brings something different to the table. Which is right for you?

Read More »

Copyright © 2020 Legacy Partners LLP | Exit Planning | Merger & Acquisition Advisors