July 21, 2022
M&A In Turbulent Times: Advice for Boards
This recent blog by Paul Weiss’s Jeffrey Marell provides some advice to boards to keep in mind when they navigate the volatility and uncertainty of current market conditions. One piece of advice he offers up is the need for patience, because putting deals together & getting to closing is going to take more time in the current environment:
When markets are rising (or at least stable), it is typically much easier for companies to agree on M&A terms. Deals are, of course, still done during times of volatility, but deal valuations and modeling get more complex due to their dependence on market pricing. Deals may involve stock considerations. Even cash deals may be affected because buyer access to credit markets may be based on stock valuations. Even if the transaction involves private assets, valuations may look to public company comparables.
Separately, added scrutiny from antitrust regulators will mean that deal terms related to such approvals will be more complicated to negotiate and the approval process itself will be lengthier. Given this, boards should anticipate a longer timeline and more fits and starts than a typical M&A process in a stable or up-market environment.
– John Jenkins