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Corporate Transactions: Pandemic Has Changed How Deals Get Done – New Orleans, Louisiana

New Orleans, Louisiana 2021-11-01 09:31:13 –

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New Orleans — Like all other aspects of our daily lives, the market stagnated with the launch of the COVID-19 pandemic in March 2020. The transaction was closed as businesses, lawyers and bankers came up with new ways to do their usual jobs from basements, guest bedrooms and kitchen tables. However, once Zoom logins were remembered and the background of the new home “office” was properly placed, the market surged in late 2020 and transaction flows exceeded pre-COVID levels throughout 2021. If you’re in a market that grows your business through acquisitions, attracts new investors, or raises new money, here’s how the COVID-19 pandemic changed the way your next deal closes.

A new field of diligence

The COVID-19 pandemic has become a unique topic of due diligence and is important to understand in the same way as a company’s financial statements and org chart. Paycheck Protection Program (PPP) is widely used to support businesses of all forms and sizes and to understand if a company has received a PPP loan and if the loan has been granted, a due diligence checklist for all. Must be listed in. If your company receives a PPP loan or other loan or grant through various pandemic remedies, be prepared to disclose the relevant documentation. It is important for the SBA, the government agency that issued the PPP loan, to hire an advanced M & A counsel because there are restrictions on how companies can change their management of PPP loans unpaid.

Another important area of ​​diligence brought about by the pandemic is understanding how the company responded to the pandemic. This study not only understands the economic impact of a pandemic on a target business, but also looks at how companies have changed their day-to-day operations and which of those changes are permanent. For example, a company that could go completely remote might no longer have the office space needs it had before the pandemic, and understanding the relevant leasing could be an important due diligence topic. there is. On the other hand, companies that couldn’t leave completely, what steps the company took to protect front-line workers and how technology was used to reduce direct direct interaction with customers. There are unique changes to analyze, such as whether you used it.

The widespread release of effective vaccines in the United States entered a new phase of the pandemic, leading to additional but equally important due diligence topics. Enterprises should expect to be asked how they maintain access to critical supplies within the ongoing constraints of their global supply chain. In addition, as a “major resignation” is underway, companies need to be ready to discuss what steps they are taking to hire and retain talented people. Finally, the release of vaccines and recent federal vaccination mandates have initiated another investigation into vaccination status and regulations, or company-issued mandates.

Close a transaction

In addition to expanding the scope of diligence, the parties need to prepare for different trading experiences in the post-COVID world. Buyers, investors and lenders need to be prepared to rely more on virtual data rooms than they did before the pandemic. In addition, you should expect a zoom management presentation. This can be time consuming and may require additional details, depending on the complexity of the companies involved. Finally, the parties also need to be prepared to negotiate with Zoom about WebEx. It’s not uncommon before a pandemic, but virtual bargaining is now everywhere, regardless of the size of the transaction.

While moving to a virtual due diligence and negotiation process has improved efficiency, virtual due diligence and negotiation can be misleading because it is difficult to convey body language in a 2×2 inch box on the screen. Unfortunately, this makes it difficult for the parties to build trust, which can lead to prolonged diligence and negotiation. To counter this risk, it is even more important to consider how you are communicating both within the trading team and with the other party.

During the due diligence process, extra time is spent to ensure that the data room is fully populated and laid out in a user-friendly format, which not only facilitates the due diligence process, but also lenders and invests. You can show your home, or buyer, that the company has nothing to hide. When a deal proceeds to negotiations, an effective trading team needs to coordinate before the negotiation call, much like a sit-in negotiation meeting. The trading team also needs to be clear about who can have a sidebar with the other side, just as if the negotiations took place directly. Unapproved text or email from the entire trading team can interfere with and upset negotiations and foster a lack of trust between the parties.

Once the transaction is negotiated, you can receive a packet of signature pages and forget to sign page by page until your hand hurts. This pandemic has accelerated the adoption of DocuSign and other digital signature platforms, allowing transaction documents to be executed quickly and efficiently with a few mouse clicks. These platforms have also made virtual closing even more common. Although more efficient, these virtual closings mean less chance of festive dinners and drinks after the closing of a transaction.

Thankfully, with the decline in the number of COVID cases and the widespread adoption of vaccines, we hope that the worst of the COVID-19 pandemic is behind us. However, we anticipate that the changes caused by the pandemic will become a new normal. By taking the time to proactively prepare and adopt these changes at the beginning of the next transaction, you will be able to execute a smooth transaction and complete it successfully.

By Noah B. Cresler and Jean-Luc Delpy, both lawyers at Baker Donnelson’s New Orleans office. Contact information is nkressler@bakerdonelson.com and jdelpy@bakerdonelson.com.



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