Like everyone else, most of the investors who buy and sell companies went home in March and in the words of one major dealmaker, went into “life-raft mode,” shoring up the businesses already in their portfolios and helping them plot a course forward.
But that’s just the tip of the iceberg, which includes a lot of private equity and venture types looking to wheel and deal. Many buyers have money and access to more, while business owners are resetting value expectations at a time when an economic recovery looks to come at a snail’s pace at best — and not until late next year or 2022 at worst.
That includes a special focus on categories such as skin care, hair care, food and beverage, health and wellness and pet care. “Those are areas that we think will be strong regardless of the situation,” Granoff said.
Detwiler pointed to Lilly.ai, a Fernbrook investment, as a company that fits neatly into the future. Lilly.ai uses data on consumer shopping patterns to serve up recommendations and helps reduce returns. Typically, companies are bought at a multiple of earnings before interest, taxes, depreciation and amortization — a measure of how much money is flowing through a business. That’s harder today, when businesses have been shut down, are off dramatically this year and when next year is still anybody’s guess.
As the established players survey the landscape, there are also some relatively new ones across the spectrum that are coming to the market with fresh eyes. “People are now asking questions they haven’t asked for a while, about risk tolerance and risk sharing,” Cole said. “I think people are becoming a bit more conservative. For us, it’s always about finding the best founder.”“Access to talent is a lot more robust than it’s ever been,” Cole said. “A lot of companies have gone under, furloughed people, laid people off. There’s going to be a lot of really good talent for these earlier-stage businesses.
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