For as long as the COVID-19 crisis continues, it stands to reason that business activity, including acquisitions or divestitures will be impacted. Transactions that are in the early stage of negotiations or in the planning stage may be paused or abandoned altogether. For transactions that remain conditional or have moved into the unconditional phase of the deal lifecycle and are pending closing, questions about whether or not the transactions can proceed as originally anticipated will most certainly arise.
During emergency situations some businesses will be able to take advantage of opportunities that may present themselves. These opportunities may be targeting competitors, or clients, or refinancing to take advantage of new stimulus-supported financing options.
COVID-19 is fluid and dynamic. Things are changing rapidly. If you have a transaction that is being considered, in early stage, or nearing closing, here are a few key considerations to keep in mind:
Will you be able to meet the timelines initially built into the agreement?
Does the uncertainty of COVID-19 give you enough time to complete your planned due diligence and will the amount of due diligence you now want to conduct change as a result of COVID-19? Do you have enough time to receive any requisite consents from third parties or any approvals or certificates from regulatory agencies that may be required? Many governmental departments or third parties are impacted by COVID-19 and some may have reduced capabilities or diminished service standards. Simply put, you may need more time.
Do you have the right conditions in your agreement?
Will obtaining director or investment committee or shareholder approval be more difficult than anticipated in the face of the COVID-19 pandemic? Does your financing condition provide you with the comfort you need in the event your lender has to renegotiate your terms?
Is the money right?
Whether buying assets or shares, has the landscape changed such that the offered consideration is still in line with perceived new business realities?
Is there more risk?
If buying the shares of a company will there now be increased risk from third party creditors and does your agreement account and properly allocate risk in light of COVID-19? Can the business being acquired still operate in the normal course before the closing takes place? Likely not, and what influence or say do you as a purchaser have in the decisions being made by the target company to address COVID-19 and how will those decisions impact your anticipated deal and revenue?
Parties to existing agreements will undoubtedly face real challenges and many questions. Negotiating amendments may be the required. Depending on the stage of the transaction and the agreement terms, and the parties involved this can be a daunting task. We can help.
Please do not hesitate to contact your relationship partner or lawyer if you have any questions or if we can be of assistance in guiding you through these new challenges.
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This article represents general information and is not legal advice. Please contact us if you would like legal advice that is tailored to your particular circumstances. We would be happy to help.