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COVID Impact Statement Becomes Key Transaction Document


Buying or selling a business in the middle of an ongoing pandemic has a lot of oddities well beyond the awkwardness of Zoom calls. 

In the first quarter, M&A activity slowed some, basically halted in those ugly two weeks of chaos after shutdown orders expanded across the country. In all, deal activity dipped by about 5 percent compared to the fourth quarter of 2019. Multiples, prices and final sales came in on track, according to Small Business Deal Advisors. 

According to Max Friar, partner and co-founder of Small Business Deal Advisors,  the first thing buyers ask about now that deal flow is picking up again is how COVID-19 affected the business. 

“The first question on any buyer’s mind right now is how has COVID impacted it. And buyers are scrutinizing every deal more closely. They don’t want to finance a deal that might be shut down in a second wave,” said Friar. “What we are doing is asking our clients trying to figure out how has this impacted the business, try to take us 30, 60, 90 days in the future. And we’ve been putting a COVID impact statement in our materials.” 

He said that impact statement has become a key part of the process. Instead of a second round of due diligence and a whole lot of unknowns, a selling company can outline how the pandemic affected it, what was done to mitigate the effects and how the company emerges. 

Friar shared one such impact statement for a coffee shop that successfully sold in the midst of the pandemic. In the statement, a buyer could see that sales collapsed by 70 percent, hours had to be cut but also that the company successfully used direct marketing to get the word out about gift cards, takeout and curbside ordering. The statement also included how the shop used delivery platforms to increase order volume and how the platforms reduced fees and offered free delivery—more to promote in marketing. The utilization of delivery services was not something many competitors did, something Friar highlighted in the statement. 

“I’d love to say we saw something coming, but truthfully the trend seemed to be that people were heading toward these things anyway. Even if these places are taking a cut, we can do more volume,” said Friar. “Others that had not wanted to deal with the technology, they closed down. I feel bad for them, but I think that restaurants, franchised or not, if they’re not getting on board, I don’t know what the future looks like.” 

Technology was a major factor in the sale of that coffee shop, not just the delivery platforms but a more robust website with online ordering and digitally savvy marketing procedures. Putting that into an impact statement made it clear that the company could absorb even a major shock, and potentially another one from the second wave some predict this fall. 

Doug Yntema, an associate at Small Business Deal Advisors, is helping with A&W resales right now, and said the impact statement showed some real strength of having a drive-thru and plugging third-party ordering into the process. 

A&W CEO Kevin Bazner said recently that it was as easy as drivers announcing that they were there to pick up an order. 

“Some of the A&Ws actually increased sales and did really well,” said Yntema, noting he’s sold three this year, one at the peak of the COVID-19 crisis. “And we have a chain of pizza restaurants for sale. They have a buffet style. That impacted them but their number went up a bit on delivery and carryout.”

He said getting all that performance data in writing speeds up the deal process significantly, as does including operational issues like supply-chain disruption or vendor issues.  

Banks like these statements, too, for financing in this new normal, as Mike Rozman, founder and CEO of Boefly, noted. The company created its own sort of impact statement via a lender questionnaire. 

“We created a questionnaire that lenders are using to better assess a new applicant, a COVID impact questionnaire. All lenders want to get insight into how COVID has impacted you and what it’s done,” said Rozman. “Banks just want to understand their exposure. The impact statement gives them some clarity that the prospective borrower is thinking about, how COVID will impact the business going forward. You want to make sure that the owner is mindful that we’re in a new normal.”

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at




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