TORONTO, ONTARIO, CANADA, March 16, 2020 – Beacon Mergers & Acquisitions
We wanted to give you our perspective on what is at the forefront for many business owners these days – the COVID-19 (CV) situation.
During uncertain times like these, it is important to remember that the underlying fundamentals of our economy are strong and should give us the resources that we need to overcome and defeat the current challenge.
Just within a few short weeks, it seems like one of the longest bull markets and economic expansions in history has abruptly come to a halt because of the COVID-19 situation. Market volatility is high as the safety of families, friends and stability of business owners and their livelihood, all of a sudden seem at risk.
In the Canadian market, which is known to be more conservative, the mergers and acquisitions (M&A) world held their breath in the early weeks of the spread of Coronavirus. As the new reality of cancelled public events, stockpiling reserves and painfully keeping one eye on our crashing dollar sinks into our nation, there are also many positive trends emerging, that business owners, and savvy investors need to be aware of.
“In this time of crisis, we have to admit that we expected the phones to go silent and deals to come to a halt,” says Alex Shteriev, Managing Partner, Beacon Mergers and Acquisitions. “We are extremely pleased to say that this has not been the case. We feel that is partly due to our international reach. Companies and savvy investors are looking to seize the moment to deploy dry powder and acquire companies at cheaper multiples. In addition, a lower dollar makes the acquisition of Canadian businesses attractive as investors seek to diversify their portfolios. This is a trend we hope to see more of as the dust settles around this economic downturn for our country and worldwide”
Beacon, is the largest privately-owned lower-mid market M&A firm in Toronto, Canada’s financial hub. With an international reach and a proven track record across Canada, a U.S. office in Washington, D.C. and an affiliate office in Singapore, Beacon has proven its capabilities through 15 years of experience in a vast array of industries having yielded serious results for its clients.
“What we are seeing is a lot of outreach from the United States and international private equity firms, and large corporations hoping to diversify their portfolios. As well, the drop of the Canadian dollar is catching the eye of avant-garde investors, trendsetters and industry leaders” says M. Will Fischtein, Founder and Partner at Beacon Mergers & Acquisitions. “A trend seems to be forming into what appears as a vast awakening that diversification is necessary. The savvy investor is looking to pick up companies, or eat up their supply chain while others wait for the dust to settle”
Canada, in general, prides itself on being stable and its medical system will shine in turbulent times like this one, while other countries like the United States will feel pressure as more strain is put on their healthcare systems. Also, as a general rule, Canadian companies, especially in the lower mid-market are much less exposed to short term disruptions in the marketplace as they are much less leveraged compared to their US counterparts.“In light of what appears to be a grim time, we are pleased to witness something positive fundamental changes emerge despite the destructive effect it has had on many businesses. With that said, it is important to note – sellers need to be realistic about the value of their company in a time like this” says Alex Shteriev. “Top dollar is not going to be paid, profits will be down and the books will reflect the impact industries will take. Not to say that this can not be balanced off with proving the potential the business holds. What needs to be presented is the opportunity for the new buyer to see continued growth, regaining market share and ramping up profits. Using our expertise and years of experience, we know where to look and what to highlight to assist both the sell-side and buy-side”.
“We only take on profitable companies,” says M. Will Fischtein. “There are legitimate reasons a seller wants to sell; retirement, fall out with a business partner, divorce, illness. However, in these times we are open to seeing the potential the company still holds regardless of the low numbers 2020 will yield”
With the drastic decrease in interest rates and the expected stimulus by the Canadian government, here are some industries and services we expect to see thrive even in the immediate post-pandemic period:
“I think there are a lot of exciting opportunities for our clients in the coming weeks and months,” says Shteriev. “I believe more people will value lifestyle after facing health threats, or fear of losing their jobs. More people will reconsider chasing the dream of owning their own business and controlling their destiny. Overall, whether looking for value or looking for market positioning, 2020 will present various exciting opportunities to the savvy owners and investors.”
Although we don’t have a crystal ball, from a business perspective we expect the market environment to be dynamic and potentially volatile over the next several weeks, but we do not expect any long-term impact on the business environment. Again, the underlying macroeconomic fundamentals are strong and that, combined with low-interest rates and surplus capital, should support M&A activity going forward.
We wish you, your business, and your loved ones’ safety and good health during this time. In the midst of challenges, there are always opportunities. Past history shows us that this too will pass and that when it does, we will emerge stronger than before.
The Beacon Team