Options to Consider From an Investment Banking Perspective During Covid-19 with Adam Breslawsky | Ep. 99
Today, we’re excited to have Adam Breslawsky joining us! Adam is Managing Partner, and he’s also a member of Oberon’s management committee at Oberon Securities, which is a middle-market investment banking firm.
Adam is an investment banker by trade. He grew up and gained his early experience in product groups like mergers and acquisitions, and underwriting high-yield bonds, at large investment banks. Having worked with companies across the industry spectrum, he finds the current environment to be the most challenging operating environment for all kinds of companies. This is because there are very few industries that have been spared from the carnage that has affected an enormous number of companies, due to the pandemic.
Coming up with a game plan
At this point, the initial shock of the global pandemic has worn off, so people are now doing whatever they can to marshal their resources and come up with a game plan.
Providing a framework to help people navigate their next steps
The projected loss in the market research industry, as a result of the pandemic, is about nineteen billion dollars, worldwide. In today’s episode of Data Gurus, we will be providing a framework to help business owners think about how to operate their businesses, and how they can best navigate their next steps.
Businesses are losing money
Many businesses that were making a few million dollars on an annual basis before are now losing money.
Some business owners, who are very responsible cash managers with access to a line of credit, and have been operating historically without any debt, are now deciding to draw their entire line of credit in cash, even though they might not need the money right away. They are doing this to ensure that the banks don’t shut down their lines of credit.
Different types of companies
Adam has noticed that the companies that were struggling before the pandemic are the types of companies that are now filing for bankruptcy. And some of the companies that are filing for bankruptcy now can be expected to liquidate, as opposed to restructuring.
Other companies have found ways to weather the storm, and the owners of those companies are focusing on strategic, long-term initiatives.
And there are also a lot of companies that are poised to become more successful than ever. So once we have turned the corner on the coronavirus pandemic, they will perform better than they have ever done before because they will be leaner, more flexible, and more focused.
Bankruptcy versus liquidation
Both business owners and investment bankers prefer to help businesses restructure outside of the bankruptcy process, rather than liquidating the businesses.
The companies that are going to weather the storm
The companies that are most likely to weather the coronavirus storm are the companies that were operating well enough before the pandemic. Those companies have been hunkering down, negotiating with their vendors, reducing their salaries, and cutting down on their expenses as much as possible.
The mindset of the owners of those companies is evolving more rapidly than Adam has ever seen before. And they are often looking at raising some debt, as a reserve.
Qualifying for PPP (Paycheck Protection Program)
The Paycheck Protection Program involves a short application.
A company’s ability to qualify for PPP is based solely upon that company being able to demonstrate that their business has been negatively affected. And businesses also have to be small enough to qualify for PPP.
A great opportunity for some people
For some people, this is the first opportunity that they’ve had in more than a decade to acquire a business in a market that is more friendly to them, as buyers, than it is to sellers.
There are also fewer buyers now than there were before, so if someone expresses an interest in a company, it is certainly worthwhile, in the current economic climate, for the owner to pay attention to that.
Private equity investors will usually invest through both good times and bad.
Generally speaking, the people that Adam has spoken to across the middle market continue to be active in terms of assessing opportunities. They continue to have tens, or even hundreds, of billions of dollars of dry powder that they are seeking to invest, cumulatively, into healthy middle-market businesses because it’s a buyers market for the first time in a very long time.
This could be a good opportunity for companies to merge, however, the merging process could be risky, so Adam advises people to make use of a middle-man.
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