Why buy a business during a crisis?
Across the media, from tabloids to broadsheets and online, we are bearing witness to very real business casualties of the Covid-19 crisis. The lockdown has, as everyone knows, resulted in unprecedented fiscal stimulus package from the government to shore up the economy and try to prevent a recession at the levels of the Great Financial Crisis of 2008 or even worse the Great Depression of the late 1920s and 1930’s.
Keeping people attached to jobs, money in employees pockets and making loans available to businesses to prevent a liquidity crisis that results in an untimely demise of a business will be a huge buffer for the economy. Certainly the Government has been proactive in the creation and timely in the announcement of these measures to prevent the mass financial panic that in previous recessions have witnessed.
So in this current environment - that can be called shutdown rather than recession as we still wait for the return to work and the new reality to settle - cash is king and conserving it seems to be the mantra.
But conserving cash would suggest that businesses do nothing new and just wait out the crisis. From the 2008-10 recession, we know that the businesses that thrived as they emerged from the crisis were the ones who had used the period to evolve and focus on what customers in the new economy would now need rather than hoping to get back to where they were before the crisis.
When written in Chinese, the word "crisis” is composed of two characters. One represents danger and the other represents opportunity.
- John F. Kennedy
And as Vinod Khosla, co-found of Sun Microsystems, said:
“Any big problem, is a big opportunity.
If there is no problem, there is no solution”
Businesses that streamlined and engaged with new ways of doing things and new technologies thrived. After the total change in working and social practices that Covid shutdown has forced on us, it is it unrealistic to think that everything will snap back exactly how it was. The budding shoots of new practices and new efficiencies have been laid down and these will be here to stay in some form or another.
Business meetings will not need to be held face-to-face when we have all seen how well video conference meetings can dialled into rather than the gruelling, time-consuming drag of business travel. Plus the environmental gains for this change.
Also, the move to even more online shopping behaviours and deliveries will have really dealt a permanent blow to the high street, one from which it is unlikely to fully recover.
So is this now the time to invest in acquiring a business? Does that mean a big investment of cash in the time we are advised to conserve.
Acquiring a business can do one of two things – it can bolster your current production should your business be in one of the growth sectors of the economy and there are many in this area ranging from pharmaceuticals to groceries to online gaming and technology and automation through AI.
It can prepare you to take advantage of new market opportunities by being ready with your evolved offering when the lock down lifts.
There are many businesses out there that are not in such a fortunate position. These businesses will be looking for strategic partnerships or a sale that could help smooth their current issues and may therefore be willing to look at more imaginative, innovative payment structures to ensure that both businesses not only survive the lockdown but actually both thrive in the soon to arrive new ‘normal’.
If this C19 crises is a big business problem, then the counter to that is that is also a massive business opportunity and those whose seize the moment and plan and prepare for the future will do well; those who stare at their reducing cash balance and do nothing else than try to conserve cash and stem the flow, will still be in that same position at the end of the crisis.
Article written by Business Sales & Acquisitions Consultant, Sian Murray