Hugh Cathey has been both a C-suite executive and an investor, so he knows something about identifying strong investment opportunities.
“The No. 1 thing is the leadership team,” the CEO of ChromoCare says.
The quality and energy of leadership, their willingness to persevere is critically important he says, especially in the face of unprecedented disruption brought on by the pandemic.
Cathey says he’s been so far astonished at how quickly buyers and sellers have been able to come together on price and terms to get a deal done in a COVID environment. However, the deals he’s seen get done at a faster pace have solid EBDITA history, and the leverage of EBDITA to debt is manageable.
“Due diligence has been probably at the same level as in the past,” he says. “Maybe it’s that people have less distractions in the course of a normal day and maybe more work is getting done faster.”
When it comes to access to capital, he says companies have options. Those that are looking to make acquisitions using debt through private equity, as opposed to cash or stock, that can demonstrate good leverage on the debt versus EBDITA or earnings of their acquisition targets don’t have to try too hard to get local PE firms to come to the table.
“I love it,” Cathey says. “I’m not sure I can totally explain it. But I’m taking advantage of it.
Financiers, however, are putting more emphasis on the contractual relationships companies have with their customers. That’s mainly because of the concern over loss of customers related to COVID. But otherwise, there is debt out there to support deals.
Cathey was featured at the Columbus Smart Business Dealmakers Conference in September, sharing his insights on the M&A market and his outlook for future dealmaking.
