The deal world heading into 2021 is active, according to Locke Lord Partner Michael Wilson, who says activity has sprung back after a pause near the beginning of last year.
“I’ve probably been as busy over the past couple of months as I have my entire career,” Wilson says. “People are out there, people are trying to do deals.”
There has been a rush to quality following a 2019 deal market that he describes as overheated.
“We were seeing auction processes where buyer were coming in and just agreeing to no indemnity, public-style deals in lower middle-market M&A, which was sort of unheard of a couple years ago.”
What the pandemic has done is led buyers and investors to pause, take a hard look at their portfolios, and really think carefully about what they want to be in.
“The pandemic reintroduced a level of caution that maybe wasn’t there earlier this year and late last year,” he says.
Deal structures have also been affected with Wilson saying he’s seeing a lot more growth equity deals and a willingness to take a minority stake, and that’s happening with investors that would typically only take majority positions.
“Minority investment deals have kind of been over the past couple years especially as the deal market has been so hot. Now, looking at those deals is a little bit different. It’s almost a risk mitigation tactic. You’re not fully invested in the company because you’re not controlling it, but you’re also working alongside founders, you’re working alongside other investors so you know they’ve got skin in the game, so you get a little bit of an insurance policy from that.”
Wilson spoke on the Smart Business Dealmakers Podcast about changes he’s seeing in contracts, the legal concerns of investors, the performance of various industries through the pandemic, the pandemic-led changes he expects to see stick around post-COVID and more. Click the link below to hear the full interview.
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