
Corporate Finance Accomplishments and 2020 Industry Trends
Recent Transactions Recent Transactions
Key Industry Trends Key Industry Trends
Year-end Review and 2020 Outlook
2019 was a great year for our clients and colleagues and we are thankful for your collaboration. With decades of experience, the firm's Corporate Finance practice delivers high-quality, independent and objective financial advice that corporate decision makers can trust. We look forward to continuing to work together in the year ahead.
View key 2020 industry trends below as well as some of our recent experience with our incredible clients. Hover on each industry below to view our recent select transactions.
Recent Transactions

2020 Key Trends: Aerospace Defense and Government Services
U.S. defense budget growth is expected to moderate in FY2021 and beyond, after years of significant investment and force structure build-up under the current administration. These budgetary headwinds were anticipated pre-COVID-19 and are expected to be exacerbated by the fiscal strain of the pandemic on the broader U.S. government balance sheet, with defense possibly becoming a “bill payer” as it has in previous budget crises. This is expected to force tough decisions regarding which programs should continue to receive funding priority, with a likely focus on continued modernization of the armed forces, versus sustainment of legacy platforms.
Regardless, the threat environment remains high, and key next-gen technologies, including hypersonics, directed energy, artificial intelligence and machine learning, will continue to receive funding priority. The upcoming U.S. election cycle appears to be less of a factor in long-term strategic priorities for the Defense Department, regardless of outcome. Despite this, the near-term/immediate impact of COVID-19 on the sector has been relatively minimal, with the entire sector being declared “Mission Essential” by the U.S. government, and funding continuing to flow from the Defense Department and Federal Civilian agencies’ various budgets. Defense remains “defensive” in the current fiscal environment, as such, strategic and financial buyer interest in the sector is expected to remain strong in 2021.

2020 Key Trends: Healthcare and Life Sciences
One of the few bright spots emerging from the crisis has been the widespread adoption of telemedicine by patients, providers and payors. Medical specialties with a high proportion of CPT codes reimbursable through telemedicine have been able to generate revenue from remote consultations while specialties with fewer telemedicine eligible codes have been restricted to reimbursement only from emergency procedures. Capitated, risk-bearing providers have also fared well, at least for the time being. Some non-essential medical specialties that were closed may snap back as physicians treat a backlog of procedures that cannot and should not be deferred. However, these practices may also find themselves facing working capital challenges due to lengthy revenue cycles.
Once the economic recovery takes hold and lenders are back to financing acquisitions it seems likely that consolidation activity in healthcare will resume. Many of the smaller, independent physician practices that survive the downturn may become more receptive to selling to larger, better capitalized practices, allowing the them to practice medicine without the headaches of dealing with creditors, meeting payroll, staffing, billing and collecting receivables.
Changes that may come from the crisis, in addition to the adoption of telemedicine, include making permanent the recent waivers of in-state licensing requirements that allows providers to cross state lines to alleviate regional shortages. Greater price transparency could also emerge if the federal government conditions increases disclosure of insurance carrier contract terms on providing additional financial aid to the hospital sector.
Finally, while the impact of the crisis on the November elections is unclear, if the crisis tilts the political balance of power to the Democratic Party, legislation to expand ACA coverage, if not to promote even more progressive policies such as the Public Option and Medicare for All, can be expected.

2020 Key Trends: Technology and Telecom
Following a very active year for technology M&A in 2019 and with another record year for software M&A, M&A activity and valuations were poised to remain strong for the first half of 2020. However, COVID-19 significantly impacted M&A deal values and valuation multiples in March 2020. Given a very robust start to the year in January and February, the first quarter deal volume and value was consistent with recent quarters, but in April 2020 we saw a decline in median deal multiples from 2019’s record high. Despite the lower M&A deal valuations, the technology sector has continued to show resilience with a strong recovery in public market valuation multiples, which are close to all-time highs.
While the market disruption from COVID-19 is impacting all businesses, certain technology sectors, such as enterprise collaboration, communications, cyber security and digital commerce, are showing resilience and in some cases seeing an uplift in utilization. Public market valuations for some of these sectors are already back to pre-crisis levels, and we expect to see increased M&A activity in these sectors in the coming months.

2020 Key Trends: Consumer, Food, Restaurant and Retail
Most notably, the direct-to-consumer products and services, food retail, consumer staples, home furnishings, recreational products categories have outperformed YTD; these are the most notable sub-segments where we anticipate a resurgence of healthy company transaction activity. The multi-unit retail, consumer service, restaurant and hospitality categories generally remain challenged and prone to substantial restructuring activity, although the government stimulus and economic reopening has improved performance for many of these sub-category participants.
We would anticipate the transaction marketplace to continue to strengthen through the balance of the year, as economic visibility becomes clearer and operating performance begins to return to normalized levels. We are seeing considerable pent up demand among financial investors and select strategic acquirers and a significant backlog of assets that were being prepared for market in Q1 and were put on hold due to COVID-19. We anticipate this volume to enter the market in June and Q3, 2020. In addition to corporate activity and private equity backed activity, we also anticipate closely held business owners will seek to monetize their businesses during calendar 2020. Many of the key underlying drivers of transaction activity remain intact, although a number of fundamental changes may impact market reception and business valuations moving forward. Companies will continue to seek to enhance business scale and diversity, as well as improve operating leverage with suppliers and consumer distribution channel partners. These dynamics will likely offset persistent trade tensions and incumbent operating cost pressures that we anticipate to continue through the balance of 2020.

2020 Key Trends: Energy
In February, 2020, the U.S. increased crude oil production to approximately 13 million barrels per day and exceeded its upstream capital spending to the rest of the world. This was followed by a disagreement among OPEC+ members over supply of crude and a significant decline in crude oil prices. The low demand for crude oil caused by COVID-19 related economic stoppage policies and the lack of available global crude storage caused a precipitous decline in global crude oil prices and substantial pricing volatility. As a result, upstream capital spending will likely be curtailed through the remainder of 2020. In the near term, the upstream oilfield services sector may experience a rise in cashless mergers as companies seek cost savings to combat reduced activity.
In the longer term, the industry is anticipated to undergo market share consolidation by companies with the strongest balance sheets. Downstream energy/industrial service firms will likely see a pause in near-term M&A activity until global economies show signs of recovery. As global economies recover, repair and maintenance businesses servicing companies in these segments will likely see growth and may attract strong M&A interest.

2020 Key Trends: Industrials
General industrial transactions have encountered significant headwinds in the first half of 2020, centered around COVID-19 related shutdowns. The continued uncertainties related to the corresponding economic fallout, general societal unrest and global trade tensions are expected to hamper M&A markets throughout the remainder of 2020. Across the industrial landscape, certain sectors which have been more meaningfully impacted by the economic shutdowns (e.g., automotive and commercial aerospace) and will likely remain at lower output levels for the foreseeable future. Credit markets for new debt issuances have tightened significantly and borrowing costs have increased as lenders reprice credit due to higher perceived risk.
Healthy corporate balance sheets, to a certain degree, have helped strategic buyers weather these headwinds and others are seeking to strengthen competitive positions, solidify supply chains, and look at new channels for product or service offering expansion. Industrial M&A activity is anticipated to remain at lower levels, compared to the past several years, throughout the remainder of 2020 with a gradual uptick in activity as the year progresses and the economy begins to reopen.
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