During an April webinar on emerging from the coronavirus disease 2019 (COVID-19) crisis, accounting firm Gray, Gray & Gray, fielded a question from an entrepreneur who had been in the middle of selling his business when the pandemic hit the U.S. The business owner lamented that his company’s valuation had fallen and wanted to know if there was a quick way to bring the transaction price back up to where it was six weeks earlier. “It’s not easy to return to pre-COVID conditions quickly,” said Bryan Pearce, director of strategic business planning for Gray, Gray & Gray, which serves petroleum marketers. He said there will be many business sellers in the same predicament. The current climate presents a “great” opportunity for buyers. “M&A costs will be low for some period of time,” he said. Pearce offered two, longer-term strategies for sellers facing a drop in their business valuation: 1. Rebuild your business. Demonstrate the underlying, strong fundamentals of the business are still in place, despite the unexpected blow to the economy. “Plan to come out of COVID-19 as quickly as possible and rebuild the business as quickly as possible. That’s one way to restore some – if not all – the valuation,” he said. “Ultimately, valuation is driven by EBITDA and revenue. Are there things that you can do that are sustainable improvements to EBITDA to improve the profitability of your business that, even at a lower multiple, continue to drive a higher price for the business?”
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