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DUE DILIGENCE IN THE COVID-19 ERA: Highlights from Quist strategist Victoria Hall’s presentation to Women of M&A organization

Team member Victoria Hall recently presented to M&A leaders, discussing due diligence in current times. She covered a range of topics including economic recovery forecasting, the growth rate and cost of capital, and the importance of scenario analysis.

Victoria shared the following insights and observations:

• COVID-19 will impact the expected cash flows and growth of each
business uniquely

• Some businesses see large negative effect and some businesses see
moderate negative effect

• Majority of the impact is in the forecast

• Management should be focusing on projections in current valuations to
develop future expectations

• The average growth rate will go down while the cost of capital will rise

• The public companies’ multiples will have to be considered carefully and
further analyzed

Other participants shared a valuable information as well.

Here are a few of the highlights from:

Trish Renner, Managing Director at Robert W. Baird:

• Middle market has never been busier

• Public markets are disconnected from the private markets

• PE firms are really looking to deploy capital

• Financing markets are strong

• Public valuations have recovered, and people have recently been paying premium multiples for businesses that they can get their arms around

Karen M. Wiltgen, Principal at RSM US LLP, pointed to:

• “What if” models and scenarios: companies should focus on new term cash flow, whether or not companies should furlough employees, how they can shift, etc.

• The portfolio companies and PE firms that could pivot to these “what if” models quickly were the ones that were able to adjust and pivot at a much faster rate than other that didn’t have those solutions in place

• What if model allowed companies to respond more quickly than others since they had the decisions at their fingertips

• Key considerations for PE:

• Portfolio cash flow, legislative relief, portfolio companies’ operations, managing active deals, the sale & valuation impact

• Companies that took a PPP loan are expecting to be audited 18 months-2 years down the road. These companies are looking for some assistance/oversight and are making sure paperwork is in place to maximize forgiveness

• Outsourcing will grow, data is increasingly more important, treatment of employees is also increasingly important due to COVID-19

If you want to learn more about these trends, feel free to reach out to Victoria Hall at Quist Valuation to receive further guidance.

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