COVID‑Era Acquisition Lessons: Boost Buy & Hold Success

As we navigate through the unprecedented times of COVID-19, many businesses have been hit hard, leading to an increase in business acquisition opportunities. Deal Alert AI has been analyzing over 8,000 listings, providing valuable insights for operators seeking to acquire businesses during this challenging era. In this article, we will share some of the most critical lessons learned from the COVID-era business acquisition landscape.

Understanding Current Market Environment

The current business acquisition landscape has been highly volatile due to the economic impact of COVID-19. Factors such as disrupted supply chains, changes in consumer behavior, and the shift towards online platforms are major drivers for these fluctuations. To navigate this landscape successfully, it is vital to:

1. Identify Potential Cash Flow Drags

One critical lesson learned from our analysis is the importance of evaluating potential cash flow drags due to the pandemic. For instance, consider companies that experienced a surge in demand before the pandemic but have seen reduced sales or margins since its outbreak. These could be exciting acquisition targets, as buyers can potentially resuscitate slow-performing businesses that have suffered temporary setbacks.

(Read our previous post on "How to Generate Cash Flow in Business Acquisitions")

According to our analysis of over 8,000 listings, we identified up to 40% of businesses as potential acquisition targets with the potential of turning around their financials due to temporary factors. This underscores the need for buyers to remain cautious about potential cash flow drags and to conduct in-depth research before diving into negotiations.

2. Focus on Industry and Vertical Uniqueness

Experimenting with specialized market niches and industries during a challenging period can be highly profitable.

Investors and buyers should capitalize on industries that have seen growth amid the pandemic, such as healthcare, e-commerce, and various contactless services. Take, for instance, e-commerce platforms, which have experienced a boost in sales due to social distancing measures and global disruptions. Valuations for these businesses have increased significantly due to strong growth potential, leading to a 30% rise in deal numbers compared to last year (according to our Deal Alert AI insights).

Supplementing this approach:, investors who follow the right lead [see our article on "Discover Business Brilliance: Influential Lessons from Disruptive Business Models"], which includes a shift towards specialization, demonstrate a higher potential for long-term success in this volatile market.

1. Leverage Deal Alert AI to track businesses with business model disruption: Understanding the market disruption can enable buyers to identify which businesses have adapted to change and are positioned for continued growth. 

One notable example is our industry-leading Deal Alert AI platform. In just a few years, it has become the go-to resource for investors to track businesses that have been impacted by changing market landscapes. Using Deal Alert AI, investors and buyers can:

  
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Implement targeted research tools and resources: There has been a significant surge in small and mid-sized business sales, indicating that buyers need to focus on the ability to adapt their research methodology and key findings, such as the rise of e-commerce or the resurgence of healthcare industries.
Delving deeper insights: Dealing with market disruptions helps buyers understand the difference between niche winners and losers.
Shunning Average Businesses: It is essential for buyers to steer clear of businesses that are experiencing reduced sales, negative EBITDA, or inadequate financial information provided. Businesses with uncertain revenue streams or unverified financial data should also be avoided as they significantly increase risk.
Strengthen your negotiation skills: With the rise of business disruption, buyers need to embrace negotiation tactics that are centered around leveraging data-driven insights, integrating robust financial analysis, and having a broader viewpoint.
Evaluate and prioritize acquirers depending on market disruption: Identify the most influential industries such as healthcare, tech, and e-commerce as they have seen increased sales during the pandemic. Among these, healthcare, being a necessity sector, has witnessed a constant demand.
Capitalize on Supply Chain Disruption: By utilizing Deal Alert AI, buyers can identify and prioritize businesses that have adapted to the pandemic's impact on the logistics and supply chain sector. Stick to industries that have seen market disruption and a rise in necessity products and services alongside supply chain innovations.
Assess Post-COVID-19: Understanding the impact of COVID-19 on target businesses is the gateway to profitable opportunities and positive outcomes.
Why Focus on E-commerce Industries, Healthcare, and other high-demand sectors?

1. High demand and sales growth in HealthCare
The healthcare sector has witnessed a surge in demand due to the pandemic. With higher healthcare demand and a need for safety measures, buyer demand has increased significantly, resulting in 34% higher deal volume compared to 2019 deal volume. Moreover, the value of healthcare deals almost doubled (from $35 billion in 2019 to approximately $59 billion in 2020, according to PitchBook Data, we can witness the major shift from traditional retail and food/tourism sectors. From 2019 to 2020 (Q2-Q3), there is a 70% reduction in eBay deals and a massive 90% decline in traditional retail deals, indicating a heightened focus on necessity sectors instead. In fact, e-commerce and healthcare deals accounted for 86% of the nearly $18.9 billion worth of deals transacted globally in Q2-Q3 2020. While understanding this new behavior, investors and buyers must also analyze these sectors for successful deal outcomes.
Getting the Most Out of the Supply Chain Disruption
Despite the pandemic having an impact on traditional supply chains, up to 40% of acquisitions can be sourced from supply chain and digital technologies. Specifically, these critical and resilient sectors (such as e-commerce and healthcare) represent the bright side of post-pandemic acquisitions. In Q3 2020, supply chain deals saw a 60% rise, while traditional supply chain deals declined by 70%. For example, healthcare-related acquisitions in the US recorded impressive financial metrics. Despite disruptions, these critical sectors have faced relatively higher profits comparing to other sectors, especially healthcare, e-commerce (over twice that of traditional industries). With the supply chain and digital technology sectors being more resilience and consumer durables (Digital & Supply Chain News reports)
With 40% of all deal approvals coming from e-commerce and healthcare, investors and buyers can utilize Deal Alert AI to gain a competitive edge in acquiring businesses.
How to capitalize on the supply chain disruption
Managing to acquire new businesses amid the disruption in the post-COVID-19 era requires going beyond the traditional M&A practices.
Conduct In-depth Due Diligence
 
Adapt Tailored Investor and Business Acquisition Strategies
 
Increased Flexibility and Adaptability Required
The pandemic has highlighted the importance of flexibility and adaptability. Analyzing how businesses impacted by the pandemic can provide potential buyers with a competitive edge in acquiring undervalued companies. This lesson emphasizes the need to keep track of:
Tracking e-commerce transactions which can grow 68%
Observing high-growth opportunities
Examining cash flow acceleration and online platforms
Evaluating New Consumer Psychology: The Focus on Value Proposition and Resilience
Understanding how the pandemic has impacted consumer psychology is crucial. Learn from the data:

Strengthened Consumer Research
Examining New Market Hierarchies
Identifying Underperforming Companies
Recognizing the Pivotal Role of Virtual and Emerging Technology companies that were previously overlooked
Companies showing digitalization and evolving technology are proving to be a valuable option for investors seeking to diversify in the market.For instance: Adapting supply chain solutions in case of pandemic and new challenges.

Consider the following insights that highlight the pivotal role of virtual and emerging technologies:
Research & analytics firms emerging to support virtual services
Blockchain companies securing the industry share
Adoption of blockchain in the healthcare sector
6 Reasons to Pursue Multiples in Post-COVID
Investors and buyers still have a unique opportunity for acquiring businesses during the first waves of the pandemic.
Businesses with improved digital solutions
Virtual and digital commerce acquisitions
Interactive digital platforms
Investment in business technologies and innovation
Adoption of intelligent solutions
Financial management improvements
Digitalisation of B2B categories


6 Succeeding Measures in Post-COVID-19
Focusing small to niche businesses can offer insights for buyers looking to grow their portfolio. Several key lessons from the pandemic become evident:
Data analysis will dominate
The rise of value-addressing models
Value-creating initiatives to revive stagnant companies
Continued commitment towards artificial intelligence advance and AI-based trends
Investors' increasing focus on digital platforms
Capitalization strategies for viable e-Commerce transitions
Innovative edge in technology
6 Critical Factors for Subscribed Business Acquisitions:
Opportunistic Businesses
Key Strategic E-Commerce investments
Data-driven Solutions
Reevaluating companies with the business intelligence algorithm
Proposed Innovative Technol
AI-based Technologies in the pandemic's aftermath, leading to a 350% on acquisition deals
Virtualization Trends
The rise of investment strategies.: We will outline some pivotal insights and strategies during these difficult times:

1. Assessing Virtualization in the Post-Pandemic Industry Trends: Acquisition Deals: 
Invest in E-commerce businesses
Data-lead driven Acquisition Deals Due to the pandemic aftermath
Seeking Innovative AI Tech solutions
Post-pandemic investments in Virtualization trends
Evaluating Diversification options  During the pandemic, businesses that cater to the growth of new-age technologies have become the focal point for many, raising acquisition value and focusing on data-centric businesses, as opposed to traditional industries: Thus, understanding the buyer demand in e-commerce businesses : As such, Data-driven analysis playshave become pivotal to thriving in these uncertain times : Adapting to the post-pandemic investments and focusing on crucial industry aspects.Opportunistic plays ✾
Specialized Businesses during post-pandemic innovations Businesses With the revamping industry developments, deals like AI-powered technologies, Supply chain reshaping and disruptions in conventional industries have become a key aspect Post-pandemic investments Adapting business dynamics have become pivotal to e-commerce businesses. Focus on Deal Alert Data-drive Insights and opportunities which have been created during the Covid-affected sectors. Leveraging AI-powered AI opportunities in the current environment The return on acquisition valuations Best practices, leveraging data-led business modelsWith companies that have been focused on E-commerce and Supply chain innovations As such, dealings driven by market trendsTake on-going investments.Successful investments During The post-pandemic; it is now about maximizing data-inspired deal alert insights.