M&A deals for distressed companies expected to pick up in months ahead (MiBiz)

By Mark Sanchez (MiBiz)

The COVID-19 pandemic that slammed the economy this spring could generate more M&A deals in the months ahead.

Sales involving distressed companies, asset sales and even liquidations could rise toward the end of the year and into 2021, according to M&A and turnaround professionals. They describe a landscape nearly eight months into the pandemic where businesses have exhausted federal Paycheck Protection Program loans they got in the spring and are awaiting a final decision on debt forgiveness, or where the payment deferrals their bank provided on a loan are coming to an end.

Some of those companies now feel distress as the pandemic drags on, leading their owners to search for options.

“We do think that as that wears off, some of these companies are going to struggle, especially those that may have already been facing headwinds going into COVID or maybe were not in a position of strength,” said Matt Miller, managing director of advisory firm BlueWater Partners LLC in Grand Rapids. “If the present crisis drags on and sellers get tired, we would expect to see more distressed M&A.”

BlueWater Partners has yet to actually see a material increase in M&A deals involving distressed companies. That could occur toward the end of 2020 or the first half of 2021, he said.

Miller and others say PPP and loan modifications that companies secured last spring may have delayed some companies from falling into distress.