COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC April 8, 2020 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
WELCOME WILLIAM EISIG National Managing Partner, Assurance 2 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
With You Today BOB SNAPE JIM LOUGHLIN JEFFREY M. REISNER ESKANDER YAVAR President National Practice Leader Partner Partner, Management and Technology BDO Capital Advisors, LLC Restructuring & Turnaround Services McDermott Will & Emery Advisory Services National Leader BDO USA, LLP BDO Digital, LLC ANDREW GIBSON MICHAEL STEVENSON MICHAEL WILLIAMS TOM STRINGER Managing Partner, Tax Technical Partner, ARAS National Partner, Income Tax Provision Services Managing Director, Corporate Real Practice, Global Employer Services Practice Leader (ASC 740) National Practice Leader Estate Advisory, Site Selection & National Leader BDO USA, LLP BDO USA, LLP Incentives BDO USA, LLP BDO USA, LLP 3 3 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
M&A and Capital Markets Outlook April 8, 2020 4 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
With You Today BOB SNAPE President BDO Capital Advisors, LLC 5 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
COVID-19 Impact EQUITIES DEBT M&A Dramatic sell-off Impact not seen since 2008/09 Withdrawn deals spike Unprecedented volatility Rush to fully draw on revolvers Deal-makers hit pause button Earnings guidance withdrawn Senior debt market frozen for Pricing of deals next to impossible new deals in short term Hardest hit industries down 40%+ from highs New issuance reserved for large investment grade companies IPO market dormant 6 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Call to Arms FEDERAL RESERVE FEDERAL GOVERNMENT OBJECTIVES Zero rates CARES Act Keep the financial system flowing o SBA Unprecedented liquidity to keep the system moving o Emergency declarations Bridge to recovery Unlimited asset purchases Infrastructure next? Avoid prolonged recession o Money market o Corporate bonds 7 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Path Forward Key Questions What is the severity of the economic impact? When will “stay at home” restrictions be lifted? Even without restrictions, have behaviors altered and how severe and long-lasting will the impact on consumer spending be? Additional Stimulus What does the immediate post-crisis environment look like? CARES Act II o Is a return to “normal” where we were - or somewhere else? Infrastructure How quickly can the economy restart? Incentives and tax credits What sectors will struggle to recover and what is the impact / drag Debt forgiveness and on the overall economy? restructuring 8 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Evolving Sentiment EQUITIES DEBT M&A Trade on news / expectations Available to best rated, strong Seismic shift in leverage from issuers sellers to buyers Earnings season upon us CMBS, managed assets still Last market to fully reopen unfolding Volatility the new norm Lower multiples Fed support essential Lower leverage 9 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
M&A Market: Sell-Side Dislocation NEW TO MARKET LAUNCHED LATE STAGE DEALS Preparations continue albeit Hiatus, pause, on-hold Closed (early on) slowly Proceeding very slowly MAE / MAC / Withdrawn Monitoring impact on clients, Pulling deals in certain sectors Financing pulled or dead stop end markets, and supply chains susceptible to top line impact Deep dive of immediate impact Re-pricing Structure introduced Debating launch timing Wait-and-see 10 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
M&A Market: Buy-Side Bifurcation Existing Pipeline / Growth M&A Opportunists Proceed cautiously Vultures Deepen diligence Turnaround, special situations Buy time Working capital, liquidity Wait-and-see needs Restructure terms Bridge financing Debt / convertible features 11 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
M&A Market: Outlook Short Term Turnaround M&A prevalent Reset of seller expectations Consolidation of weak players likely Pace and extent of recovery industry specific COVID-19 impact on healthy business fundamentals o E-commerce Valuation: EBITDA adjustment… but projections o Distribution key focus o Supply chain logistics Longer Term Rekindle of withdrawn / delayed deals Dry powder Low interest rates Diligence and positioning never more important to successfully execute 12 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Mitigating Financial Distress and Improving Performance April 8, 2020 13 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
With You Today JEFFREY M. REISNER Partner McDermott Will & Emery 14 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Affected Industries Travel Food & Beverage / Entertainment Real Estate Transportation/ E-Commerce Restaurants Shipment Tele- Oil & Gas / Retail Pharmaceutical Manufacturing Healthcare communications Power 15 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Business Judgment Rule A presumption that in making a business decision the director or officer acted on a informed basis, in good faith and in the honest belief that the action taken was in the best interest of the corporation When directors and officers have fulfilled their duties of care and loyalty in good faith, courts presume, under the business judgment rule, that their decisions are valid Rule protects directors’ and officers’ ability to exercise their discretion when making decisions on behalf of the corporation without fear of a court questioning the wisdom of their decision in hindsight A plaintiff can overcome the presumption of the business judgment rule by showing a director or officer has failed to act with due care or loyalty or lacked good faith in carrying out his or her duties, in which case, the court will scrutinize the challenged transactions substantively The business judgment rule applies whether a company is solvent or insolvent 16 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Fiduciary Duties Governed by state law o This presentation primarily focuses on Delaware law o Other states’ laws are generally consistent with Delaware law Two primary duties o Duty of care o Duty of loyalty Directors’ and officers’ fiduciary duties are best understood by considering: o The nature of the fiduciary duties; and o To whom the fiduciary duties are owed. 17 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Duty of Care Directors must inform themselves of all material information reasonably available to them prior to making a business decision Directors must act in an informed and deliberate manner Directors may rely on information provided by corporation’s officers, employees and other advisors, as long as directors reasonably believe that the information provided is within the scope of the provider’s professional or expert competence, and the person so relied upon his been selected with care Directors must evaluate advice and information critically and investigate further if there are facts or circumstances signaling need for additional information It is important to establish and follow a decision-making process and maintain thorough records to satisfy the duty of care 18 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Duty of Loyalty Duty of loyalty demands requires that directors and officers act in good faith and in a manner they reasonably believe to be in the best interests of a company o Directors and officers must exercise disinterested and independent judgment o Directors and officers must avoid self-dealing and not abuse corporate opportunities for personal gain A disqualifying interest can exist because a director is “dominated” or “controlled” by a party interested in a corporate transaction Challenges to conflicts of interest can be cured by showing that an action was approved by a majority of disinterested directors who were properly informed of the conflict In addition, an independent director can be added to the Board providing additional guidance and protection Engaging with stakeholders is an important part of showing that directors and officers have pursued a good- faith attempt to act in the best interests of a company 19 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
With You Today JIM LOUGHLIN National Practice Leader Restructuring & Turnaround Services BDO USA, LLP 20 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Survival Mode Crisis IMPLEMENT YOUR OPERATIONAL Management RESILIENCY PLANS Business Cyber Continuity Resilience IT Disaster Recovery Third Party Liquidity Risk Management Management Insurance 21 COVID-19: PREPARING FOR THE ECONOMIC IMPACTS OF A PANDEMIC
Recommend
More recommend
