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COVID-19 Pivot Strategies Can Position Your Company for a Future Sale

November 11, 2020

Many companies have had to pivot operations amid the coronavirus pandemic, but seizing opportunities in uncertain times can position a business for future growth. Here are our thoughts.

Management quality is a key determinant of whether a merger or acquisition will succeed. How a company responded to the COVID-19 crisis can speak volumes about its management team and corporate culture.

Companies that swiftly and effectively pivot during the pandemic engender stakeholder confidence and goodwill, building long-term value. An effective pivot strategy also could eventually translate into a higher selling price if management decides to look for private equity or venture capital suitors at some point in the future.

Making Lemonade Out of Lemons

2020 has been a challenging year, to say the least. Today’s unprecedented, uncertain market conditions are putting managers to the ultimate test. Those that can recognize and seize emerging opportunities can outshine competitors and position themselves for future growth. They also may attract attention from private equity and venture capital firms.

Communication is key to an effective pivot strategy. Workers, suppliers, customers and other stakeholders need to understand what’s changing and what benefits the changes will bring. Communication is critical to implementing the strategy, as well as to leveraging it to add value.

For example, if the pandemic has caused your company to shift to flexible working arrangements, management will need to clearly explain its expectations to employees. What work hours and in-person meetings will be required? And what equipment, training and IT security protocol will be provided? Likewise, shareholders will want to know how the change will add value to the organization. Your CEO could post a letter on the company’s website, explaining how remote working promotes the well-being and productivity of employees.

Adapting to the Market Opportunities

Many companies have implemented pivot strategies to help generate revenue and keep workers safely employed during the economic downturn. Proactive responses can also showcase responsible corporate citizenship, thereby adding long-term value.

For example, one manufacturer shifted its production line from everyday consumer goods to reusable fabric masks for hospitals, nursing homes, homeless shelters and other essential organizations. Many of these masks were donated, free of charge. Others were sold externally to help keep the company afloat — and workers safely employed — during the pandemic.

Another manufacturer of essential supplies that remained open during state-mandated shutdowns reconfigured its factory to improve worker safety, including providing hand sanitizer at each workstation. When the supply of hand sanitizer ran out, the company developed a process for making hand sanitizer in-house that met the guidelines of the World Health Organization and the U.S. Food and Drug Administration. In addition to using the formula for its own workers, the company donated significant quantities to local fire and police departments and sold limited quantities to outside organizations.

In both of these examples, management could have hunkered down and simply relied on cash reserves, loans and cost-cutting measures to weather the storm. Instead, they decided to challenge the status quo and find opportunities to make the most of an adverse, unprecedented situation. Both have shown that their management teams can let go of legacy processes and innovate during a crisis.

Keeping Your Eye on the Prize

After your company has pivoted, it’s important for management to continuously monitor the marketplace to make sure its strategy is still relevant. When necessary, management may need to pivot again.

For example, if remote working arrangements have adverse effects on productivity and collaboration, you might consider requiring employees to work on-site one or two days per week. Weekly flash reports and regular outreach to stakeholders can help management stay on top of recent developments and the need to take corrective measures.

Finding the Silver Lining

“Bad companies are destroyed by crises. Good companies survive crises. Great companies improve from crisis,” said billionaire venture capitalist John Doerr.

These are the times that define us. Managers who take proactive steps to recognize and seize pandemic-related opportunities can position their companies for long-term success and maximize value when their companies are eventually sold. Contact our transaction advisory services team for more information.

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