This year began with a strong economy and an improving middle-market M&A environment. There was a significant increase in M&A activity as many business owners, reacting to the strong economy and excellent business conditions, began developing ownership transition plans. For some, this included the sale of their company.
However, as it became clear that the novel coronavirus (COVID-19) could not be contained, a worldwide panic set in almost overnight, causing a significant decline in global financial markets and some of the highest market volatility in history. In the U.S., in an effort to “flatten the curve” – or reduce the spread of the virus and avoid overwhelming the healthcare system with patients – all but essential business activities were ordered closed by local, state and federal governments. Overnight, businesses that were excelling prior to the pandemic were put into jeopardy as their revenues and operations were affected by the forced closures. Unlike the Great Recession, where the market calamity started with bad business decisions and mismanagement issues, these events were forced on business by all levels of government. Adding to the decline were the decisions of individuals to avoid in-person commercial activities in an effort to prevent contracting the virus. This resulted in a swift decline in revenues, followed by dramatic attempts at cost reduction and the eventual elimination of millions of jobs. Early indications are that the strategy succeeded; the curve is being flattened. Still, this success came at a tremendous economic cost.
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