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COVID-19 Environment July 15, 2020 Mary Brown Sandys, Moderator - PowerPoint PPT Presentation

M&A Investment Considerations in a COVID-19 Environment July 15, 2020 Mary Brown Sandys, Moderator Alec Watson Chris Rossi Chief Marketing & Communications Partner Partner Officer Troutman Pepper Troutman Pepper Small Business


  1. M&A Investment Considerations in a COVID-19 Environment July 15, 2020 Mary Brown Sandys, Moderator Alec Watson Chris Rossi Chief Marketing & Communications Partner Partner Officer Troutman Pepper Troutman Pepper Small Business Investor Alliance Chris Miller Partner Troutman Pepper Presented by: 1

  2. Topics To Be Covered • Transaction Processes • Considerations When a PPP Loan is Outstanding • Due Diligence • Representations and Warranties • Closing Mechanics and Considerations • Covenants and Closing Conditions • Indemnification and Representation and Warranty Insurance Matters 2

  3. Transaction Process • Types of deals getting done • Sales processes • Impact on exclusivity periods • Financing considerations o Availability of “committed” and limited “market flex” financing o Equity backstops 3

  4. Considerations When A PPP Loan Is Outstanding • Due Diligence o Loan application and certifications made o Use of proceeds o Need to review PPP loan documents and supporting documentation • Treatment of PPP Loan o Funded Indebtedness? o Repay or Not? • Impact on Purchase Price (even if repaid) o Impact on economics o Risk allocations Lender/SBA approval – process and timing o • Supporting representations and warranties and, if executory, covenants (particularly as to forgiveness matters) • Financing sources considerations 4

  5. Due Diligence • Taking additional time • Limitations on in-person diligence and management meetings • Diligence surrounding matters of customary concern have taken on greater significance, such as: o supply chains o IT systems o employment matters o insurance coverage contract “boilerplate” provisions such as force majeure o • Integration considerations 5

  6. Representations and Warranties • Specifically tailored to COVID-19 impacts • Greater significance as to those relating to operational matters, such as: o supply chains o inventory levels o customer impacts o government shut down orders o facilities and remote working environments o employment matters 6

  7. Closing Mechanics And Considerations • Sign and close vs. executory • If executory, . . . 7

  8. Covenants And Closing Conditions • Heightened focus on deal certainty • Additional interim operating covenants to address COVID-19 associated risks • Decision-making regarding target’s response to further virus outbreaks • Timing for third party/governmental consents and approvals • Role of “Material Adverse Effect” (MAE) provisions 8

  9. Indemnification And Representation And Warranty Insurance Matters • Scope of “fundamental” representations and warranties • Impact on Indemnity Obligations • Representation and warranty insurance – extent to which COVID-19 related items are excluded 9

  10. Q&A Christopher Rossi Partner christopher.rossi@troutman.com Alec Watson Partner alec.watson@troutman.com Christopher S. Miller Office Managing Partner chris.miller@troutman.com

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