You may be trying to access this site from a secured browser on the server. Please enable scripts and reload this page.
Home
Internal
Deutsch
|
English
Rödl & Partner opens new office in Waterloo, Canada |
Rödl & Partner opens new office in Waterloo, Canada |
Rödl & Partner opens new office in Waterloo, Canada |
Worldwide
It looks like your browser does not have JavaScript enabled. Please turn on JavaScript and try again.
✕
Germany
Ansbach
Bayreuth
Berlin
Bielefeld
Chemnitz
Cologne
Dortmund
Dresden
Eschborn
Fuerth
Hamburg
Hanover
Herford
Hof
Jena
Mettlach
Munich
Nuremberg
Plauen
Regensburg
Selb
Stuttgart
Ulm
Worldwide
Algeria
Angola
Argentina
Australia
Austria
Azerbaijan
Bahrain
Belarus
Belgium
Bosnia and Herzegovina
Botswana
Brazil
Bulgaria
Cambodia
Canada
Chile
China
Colombia
Costa Rica
Croatia
Cyprus
Czech Republic
Denmark
Ecuador
Egypt
Estonia
Ethiopia
Finland
France
Georgia
Germany
Ghana
Greece
Hong Kong (S.A.R.)
Hungary
India
Indonesia
Ireland
Italy
Japan
Kazakhstan
Kenya
Kuwait
Latvia
Libya
Liechtenstein
Lithuania
Luxembourg
Malaysia
Malta
Mauritius
Mexico
Moldova
Mongolia
Morocco
Mozambique
Myanmar
Namibia
Netherlands
New Zealand
Nigeria
North Macedonia
Norway
Oman
Pakistan
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
Saudi Arabia
Serbia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Taiwan
Tajikistan
Tanzania
Thailand
Tunisia
Turkey
Uganda
Ukraine
United Arab Emirates
United Kingdom
Uruguay
USA
Uzbekistan
Vietnam
Zambia
Own offices of Rödl & Partner
German Professional Services Alliance -
GPSA
(Colours appear during mouseover)
We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our
data privacy statement
.
Insights
Services
Expertise from a single source
Rödl & Partner is excellently positioned with each individual service line. Based on this and using our interdisciplinary skills we guarantee our clients a special added value from the seamless combination of the services we provide.
Our service lines
As attorneys, tax advisers, management and IT consultants and auditors, we are present with 110 own offices in around 50 countries. Worldwide, our clients trust our more than 5.800 colleagues.
Legal advisory
Tax consulting
Audit services
Management and IT consulting
Business Process Outsourcing
Interdisciplinary services
MERGERS & ACQUISITIONS
The strength of Rödl & Partner lies in comprehensive advisory by interdisciplinary teams not only in the case of transaction advisory, nationally and internationally in 110 locations worldwide.
Succession advisory
Rödl & Partner assists you with organising and implementing company succession solutions in line with your expectations, wishes and needs. In this process, we provide comprehensive legal, tax and business advisory.
Mergers & Acquisitions
Stay informed
The newsletter Corporate Law, Deals & Capital Markets informs you every month about current topics in the areas of corporate law, M&A and capital markets law.
Completed deals
Transaction advisory is interdisciplinary teamwork. We are committed to being one of the leading M&A advisors for the German Mittelstand.
Who we advise
Media
Newsletters
Stay informed on the latest developments with our comprehensive international newsletters, from Africa to Vietnam.
Virtual reality tours
Get to know us virtually and experience our working atmosphere and core brand values up close. We offer you exciting insights into the world of Rödl & Partner by using 360 degree technology.
Virtual reality tours
Publications
Good to know
Newsletters
Brochures
Investment guides
Books
Download centre
Releases
Completed deals
Media contacts
Facts and figures
About us
Entrepreneurial spirit and values
Our brand does not only consist of a logo, but also defines our unique selling propositions and our business model through our brand DNA.
Factbook
We will introduce ourselves and take you to the core of our professional services firm, tell you where we come from, how we think, how we feel, and communicate our vision of the future. Together with you.
Facts and figures
Sustainability
Entrepreneurial spirit and values
Factbook
Managing Partners
Founder Dr. Bernd Rödl
Locations worldwide
Social responsibility
Project Fundus
Read more about the previous projects of the Rödl Employee Fund for Children’s Aid in our project fund.
Rödl Employee Fund for Children’s Aid
Partner cities: Kharkiv-Nuremberg
Family and career
Awards
Compliance & Incident Reporting System
Digital Agenda
Careers
Insights
Transactions in difficult times of corona virus
ASEAN
ASEAN Forum
Digital Agenda
E-Invoicing
Insights
Currently selected
Recent
Alle Kolumnen
Altersvorsorge
Antitrust Law
AOA
Artikelserie im OMV Fokus
ASEAN
Assurance & IT in der Gesundheits- und Sozialwirtschaft
Aufsichtsrecht
Außenwirtschaft und Zoll
BilRUG und weitere Reformen
International Expert Roundtable
Transactions in difficult times of corona virus
Page Content
The Covid-19 pandemic dominates our daily lives and thus also has a far-reaching impact on M&A transactions: While the healthcare sector or the IT industry see an increased number of deals, additionally fuelled by the Covid-19 outbreak, the economic situation in other industries has worsened. It's testing time for company financing solutions; approvals from authorities or boards are no longer granted. In addition, the range of temporary aid offered by the federal government to companies is currently very heterogeneous. Against this background, the earnings situation, in particular, and thus the valuation of companies in the context of transactions, is becoming more complex. Generally, the impacts of corona virus on the M&A business are very diverse and, above all, multi-layered.
This article gives a brief overview of the impacts of the corona virus pandemic on the earnings situation and the balance sheet, currently being a hot topic in the M&A business as a direct result of the pandemic. In addition, the article aims to provide an insight into risk-mitigating mechanisms for the buy-side in an M&A transaction, which are becoming increasingly important in the current market environment.
Impact on the earnings situation
In the wake of the corona virus pandemic, many companies struggle to keep their head above water with their sales revenues coming under pressure due to partial or total lockdowns and the related slump in demand. Companies that delay adjusting their cost structures to stabilise profitability are making it difficult to determine their level of sustainability in the course of financial due diligence conducted as part of an M&A transaction. This aspect is further aggravated by additional restrictions in freight transport, which means that many companies have to spend much more money at short notice to adjust their supply chains or face delivery bottlenecks.
As a means of reducing costs in the short term, many companies send their employees on short-time work and resort to rent holidays for their business premises. In addition, trade shows are being postponed and meetings are being held online, which rapidly reduces companies' advertising and travel costs in the era of the corona virus pandemic. Thus, estimating costs on a sustainable basis to have a reliable basis for an adequate company valuation is becoming a greater challenge.
It is currently relatively difficult to calculate the purchase price on the basis of common valuation methods, such as multiples-based valuations, given the reasons mentioned above (decline in sales revenues, supposed cost savings, etc.). Purchase prices should therefore increasingly be made dependent on the future development of the company, e.g. by applying earn-out regulations.
Impact on the balance sheet
The evaluation of the balance sheet also becomes more complex as a direct result of Covid-19. Companies temporarily receive subsidies, which in the course of an M&A transaction should be examined for any repayment obligations and possibly taken into account as a purchase price deduction (net debt) or otherwise considered in the purchase agreement. In addition, payment deadlines are changed, rental and lease payments suspended and liabilities postponed in order to secure short-term liquidity. This temporarily reduces the level of the working capital and would not be sufficient in the target company's normal course of business. To address this problem, we recommend that the buy-side incorporate a working capital mechanism into the purchase agreement.
In general, the current pandemic is spreading uncertainty on the part of the buy-side in M&A transactions. This aspect is further aggravated by increasing dynamics in many markets, which can cause the earnings situation of a target company to change rapidly at short notice or make planning assumptions no longer feasible. Therefore, we additionally recommend incorporating the so-called Material Adverse Change clauses (MAC clauses), which allow the sell-side to terminate or modify the agreement if additional negative events occur.
In principle, the impacts of the corona virus pandemic on target companies in potential M&A transactions are very heterogeneous. While especially customer-based industries (e.g. retail and gastronomy) are under pressure due to the current restrictions, the Covid-19 pandemic has been a catalyst for already existing trends, especially in the healthcare and IT industries. Remote work as well as digital processes and administration have suddenly become indispensable for the survival of institutions and companies, which means that, for example, the topic of IT security has come into even sharper focus. Business models that have been positively influenced by the corona virus should undergo careful scrutiny. In particular, the focus should be on the question of which developments really are long-term in nature so that too high a purchase price level can be avoided.
Conclusion
The impacts that the Covid-19 pandemic has on companies are very diverse, in terms of both earnings and the balance sheet. At the same time, market uncertainty in the area of M&A is increasing, making financial due diligence of a target company more complex and increasing its relevance. Common analyses of normalisation issues (quality of earnings) and purchase price adjustments (net debt) must be increasingly examined for impacts caused by the corona virus. In this context, risk-mitigating regulations such as earn-out clauses should also be given greater consideration.
From the newsletter
M&A Dialogue
Issue April 2021
Contact
Jochen Reis
Partner
+49 6196 7611 4775
Send inquiry
How we can help
Transaction advisory |
Mergers & Acquisitions
Experts explain
Turn on more accessible mode
Turn off more accessible mode
Skip Ribbon Commands
Skip to main content
Turn off Animations
Turn on Animations
Deutschland
Weltweit
Search
Menu