COVID Crisis and M&A Risk Tolerance
Entrepreneurs take risks. Risk is an implicit input to the success of every entrepreneur. For example, most people would not put up their home and retirement to secure their business future. Yet, entrepreneurs do this every day and more. Though it may be obvious, every person, including entrepreneurs, have different risk tolerance appetites. Understanding the risk tolerance profile of your client is essential. It is the single key metric for an attorney to adequately manage with a client when balancing/mitigating business risk.
Risk is always present in a business. However, what impact has the COVID crisis had on sell-side M&A? My observation of the privately-owned marketplace is that COVID initially interrupted the M&A market (and the world, of course) but that as 2020 is waning, M&A has picked up significantly. Some of the increased activity is attributable to year-end considerations. Political administration change concerns may drive other actions, but a portion relates to COVID pressures. Some business owners have “circled their wagons” and have pulled back activities relating to exit. Still, others have reached their risk cap and have been “pushed” into the market of exiting their business. And others see the market activity as an opportunity to expand their influence by becoming first-time buyers.
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Michael N. Mercurio is a leading attorney in the field of mergers and acquisitions (M&A). He serves as outside general counsel in buy-side and sell-side M&A, as well as in all business law and real estate law matters. As a strategic partner to firm clients, Mr. Mercurio regularly counsels entrepreneurial individuals and assorted entities on the many challenges, issues, and opportunities companies face throughout the business lifecycle—from start-up to eventual exit.
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