The coronavirus pandemic has forced mergers and acquisitions executives to embrace video conferences. But they draw the line when it comes to closing the deal. That must be done the old-fashioned way— with meetings in person.
The crisis has upended the M&A market, causing deals to come to a near halt. Many businesses across the U.S. have closed and companies have called off nearly all travel.
Now, web meetings are replacing conference calls for the most part. Presentations are made using Zoom’s video platform. Executives said these meeting formats are no longer frowned upon, and slip-ups like a garbled feed aren’t scorned the way they would have been just a month ago.
Even mishaps like dogs or children walking making appearances are tolerated. “Everyone enjoys that,” said Chris Anthony, a partner at Debevoise & Plimpton who advises private equity firms.
“Zoom has taken over my entire day,” said Matt Harris, a partner at Bain Capital Ventures. Harris said he uses Zoom for initial meetings with prospects he might invest in, as well as follow-on meetings with companies.
Pre-Covid 19, bankers used conference calls to negotiate deal terms and for due diligence. That seems to be changing. Consider Peter Gleysteen, founder and chief executive officer of AGL Credit Management, who had never used Zoom. Now that employees across the U.S. are working from home, Gleysteen uses it all the time.
This includes AGL’s morning firm-wide meeting, as well as conversations with investors, clients and colleagues. “I don’t do conference calls,” Gleysteen told Barron’s from his home in Connecticut. But he said he’ll switch to a conference call when necessary.
Gleysteen also said he wouldn’t use an online platform to discuss business matters of consequence. “If it’s really sensitive I’ll probably do it on the phone,” he said.
In the same vein, some executives said they don’t believe video chats can help close a deal, and for now, many deals won't get done. Key elements of due diligence would suffer, such as when buyers try to gain as much knowledge about a company as possible. They will often tour plants or stores or personally meet with management teams to gauge the sort of company they are investing in. “Meeting people in person is so critical and such a fundamental necessity for us [when investing],” one private-equity executive said.
Debevoise’s Anthony said a manufacturing client was unable to visit a site because of pandemic restrictions. The lack of information caused the investor to be very conservative with their bid, and the deal hasn’t moved forward, Anthony said. “It doesn’t help that people weren’t able to do full diligence,” Anthony said.
Bain’s Harris also said it’s unclear whether technology like video conferencing can help close a large deal “with a team you didn’t meet prior to the crisis.”
Some private equity firms are moving their annual meetings to later this year while others that haven’t rescheduled are using technology to facilitate the event.
HGGC, the Palo Alto, California buyout shop, will webcast its May annual meeting. Arbor Investments, the Chicago private equity firm, had considered using Zoom for its annual meeting but now will opt for a conference call because of security issues surrounding Zoom.
In the meantime, M&A executives, like everyone else, must deal with the blunders that come with video conferences. Jennifer Chu, a Debevoise partner who also advises private equity, said she has joined online conferences where she selected the audio portion and not the video, only to discover that everyone else was using video. “It’s kind of awkward to be that one person on the phone,” she said.