April 2020 #2
Access to some materials included in this newsletter may be limited to Red Forest Capital funds.
One of the most common questions we receive is “how has the pandemic impacted search fund activity?” We endeavor to maintain real-time insight into this question and aim to keep you informed of any relevant developments.
While deal flow may have slowed, low to mid-market deals continue to move forward and close. One caveat is that some larger lenders have pulled back with some reporting that lenders do not anticipate making new loans until mid-summer to fall. This pull-back may be longer than expected as lenders anticipate loan losses due to bankruptcies and continue to adapt to the COVID relief programs (e.g. PPP).
Buying opportunities exist, but the challenge for some businesses will continue to be how to underwrite future performance. Negotiating an LOI or PSA today will require creativity and risk-mitigating features given the added uncertainty. Consult your attorney for specific guidance and explore structures with a greater proportion of equity (including all-equity which we’ve seen in some software LOIs), to a greater percentage of seller financing, earnout, or equity rollover. Within the LOI, some have negotiated longer exclusivity, such as 120+ days and/or an end to COVID shutdown before closing.
Please contact us if you have any questions or if we can be of help. In the meantime, the following are a few updates.
INDUSTRY IDEAS
Wellness clinics will be interesting to explore, given the added stress from COVID, sleep disorders, etc.
Also consider Behavioral, Mental Health Clinics, and reports included in Research / Industries / Healthcare & Related / Behavioral, Mental Health & Sleep
Travel Insurance is predicted to reach $37 billion by 2027, at 8.6% CAGR
Virtual Experiences or Virtual Reality (VR) that has shown to address the psychological effects of stress and isolation
Travel the World with These Livestream Cameras by Outside Magazine · A new VR game lets you recreate real plays as NFL MVP Lamar Jackson
Video Games with the median age of 35+ and adjacent markets like esports and e-learning · Don't Feel Bad If Your Kids Are Gaming More Than Ever. In Fact, Why Not Join Them? by Time Magazine
Research from Games for Emotional and Mental Health Lab at Radboud
Other reports included in Research / Industries / Technology & Related / Esports & Video Games
INDUSTRY IDEAS
Q1 2020 GDP reported an annualized loss of 4.8%· The value of North American M&A in Q12020 is down 33% from a year ago to $572 billion, a seven-year low· Private Equity continues to wrestle with over $2.4 trillion in dry powder to deploy· FDA
Guidance on Conduct of Clinical Trials of Medical Products During the COVID-19 Pandemic by Loeb & Loeb
Supply Chain Mapping. Coronavirus Is a Wake-Up Call for Supply Chain Management by Harvard Business Review
VIDEO. How to Actually Work...When You’re Working from Home by Harvard Business Review
Managing remote employees: 7 tips and best practices by Insperity HR Consulting· 3 Tips to Avoid WFH Burnout by Harvard Business Review
Productivity Skills to Help You Gain Time Back by Harvard Business Review
WEBINAR. Cash Flow Forecasts For Crisis
9 free online courses to elevate your digital marketing and leadership skills by Google
FUN
Download over 300,000 books from the New York City Public Library
50 free things to do while in self-isolation by the Unreasonable Group