During Q2 2020 (April-June), the public and private capital markets experienced the full effects of COVID-19 throughout the 90-day period. Deal volume halted as the number of completed deals declined by over 50% from recent levels; however, based on the limited number completed deals, there was little to no change in valuations. The amount of debt leverage used in transactions declined, requiring buyers to fund more of the completed transactions with cash. Interest rates remained at record lows during Q2 2020, but credit spreads widened significantly, particularly for small transactions. Sitting here in September, we see an active market of buyers looking for businesses that they can understand and in situations where the buyer can accurately calibrate risk. Many deals that were sidelined during Q2 are beginning to come to market in situations where there is a clear understanding of the impact of COVID-19 on short-term and long-term growth.
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Our valuation review explores recent valuation trends in the public and private markets, directed to small and middle market business owners and the professionals and financial institutions that serve them. The review is designed to provide realistic guidance on the question “What’s it Worth?,” keeping in mind that proper preparation for real world transactions requires analysis of specific situations based on up-to-date data.
