Building relationships and taking in-person meetings have traditionally been quintessential actions for merger and acquisition dealmakers. Dealmakers normally focus their time on one-on-one meetings across different cities, as well as attending conferences, dining out, and engaging in bonding activities. Now, with quarantines and common sense arguing against face-to-face meetings, how do we build the trust and confidence necessary to do a deal?

Individuals in a myriad of industries, job functions, and levels worked from home long before the pandemic, facilitated by technological innovations that make remote work possible. Then, in 2013, working from home became a lightning rod of controversy when Yahoo! CEO Melissa Mayer decreed that remote workers would have to be in the office working side-by-side to deliver the best communication and collaboration. Her memo to all employees said, "The best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings."

When the COVID-19 global pandemic hit the United States in 2020, however, Silicon Valley and Seattle giants—Facebook, Microsoft, Apple, Twitter—were the first to send their employees home. Now, as the pandemic in the U.S. persists, these same tech giants may be among the last to return them to the office. Some of their employees may never return.

The majority of technology companies are following the "work from home" sea change because of the clear social distancing benefits it has to offer. Many expect that the current changeover may remain even after the crisis is over. Indeed, Marc Zuckerberg, CEO of Facebook, announced in May 2020 that he expected that half of his company's workers would be "remote" by 2030 and that their paychecks would be adjusted according to their location.

With all the comforts of home surrounding remote workers, one might assume employers would see a decline in productivity. The opposite, however, is the case. Employees are more productive while working at home. Companies that commit to remote work for their teams could realize substantial cost savings on real estate while concomitantly having more engaged and productive staff.

The long-term effects of the pandemic on the market for office space are controversial, with some predicting that companies will lease less space, with others citing "social distancing" rules to predict that companies will lease larger spaces that allow for people to work in safer distances.

In the mergers and acquisitions market, meeting with other dealmakers and building relationships have been integral to getting the job done. With the new reality of working in solitude, will corporate development and business unit leaders execute merger and acquisition deals despite the absence of physical presence?

The answer is, "Yes." The most recent and most "virtual" example was announced on July 13, 2020. Vincent Roche, ADI President and CEO appeared on CNBC's Squawk on the Street to comment on ADI's $21 billion all-stock acquisition of Maxim. Roche described the two companies as "cousins," and said he had long admired Maxim. He said he and Tunç Doluca, the President and CEO of Maxim had known each other for many years, and that he had "a lot of respect" for Doluca. All merger discussions took place virtually. Squawk host David Faber and Roche agreed that the all-virtual merger might represent "a first."

The new reality, as exemplified by the ADI Maxim combination, could cause more corporate partnerships to form and new technology and innovations to be created and adopted. Clearly, M&A deals have continued and will continue during and after the pandemic. Their character may change as buyers look for businesses that can tap into emerging circumstances with a significant focus on e-commerce and remote work.

Palo Alto Networks, has, for example, doubled down on SD-WAN with its recent $420 million acquisition of CloudGenix, whose cloud-based technology can streamline the onboarding of remote branches and retail stores onto the company's secure access service edge (SASE) platform.

"Once the pandemic slows, we may see a permanent change in how organizations think about remote workforces. As applications move from corporate data centers to the cloud, users need secure access from anywhere, whether that's the headquarters or elsewhere," said Palo Alto Network Chairman & CEO Nikesh Arora.

With the COVID-19 pandemic, the challenges of remotely doing M&A deals are numerous:

  • Obtaining or reviewing original documents is difficult;
  • Walking the land and visiting sites is impossible;
  • Meeting people face-to-face is circumscribed; and
  • Protecting against unscrupulous third parties using the pandemic to cut corners, or worse, commit fraud, is problematic.

It's a challenging environment we are in—and it is going to last awhile. Yet deals are still getting done. What are some things you can do to help boost your odds of success?

To effectively operate an M&A program in this environment, the appropriate response to the circumstances is paramount. Companies should:

  • Monitor regulatory pronouncements relevant to their industry and to a potential deal;
  • Monitor compliance policies, and where lacking, adopt protocols to sensibly execute and store documents digitally, replace face-to-face meetings with secure virtual meetings whenever and wherever possible, maintain social distancing when in-person or onsite meetings seem indispensable, and prevent fraud and ensure safety; and
  • Proactively communicate with regulators to ensure there is a clear understanding of how to comply with regulations in light of the pandemic

As we all know, the best-prepared plans always have to meet reality in the face, and not every potential scenario can be anticipated. To adjust for eventualities, follow these five tips for doing deals remotely:

  1. Be human, be understanding of evolving circumstances, and be ready to adapt to change.
  2. When something is not verifiable, listen, and ask more questions; develop policies if not already in place.
  3. Consider whether a change is temporary or permanent, and if temporary, when it can be evaluated.
  4. Leverage existing collaboration tools and introduce new ones to foster an optimal remote work environment.
  5. Support organizations, rather than penalizing or ostracizing them, for adapting and working to figure things out.

Whether working remotely or in the office, it is important to remember the ten golden rules that transcend time and circumstances:

  1. Address real due diligence issues as early as possible.
  2. Convene video calls with senior leaders to get buy-in and talk through any issues.
  3. Develop a game plan for attacking known issues.
  4. Use checklists and leverage project management tools.
  5. Prepare for anything; know the deal-breakers, and be intellectually honest.
  6. Encourage full investment from the relevant parties, and hold them accountable.
  7. Don't obsess over trees; keep the forest front and center.
  8. Engage with qualified advisors and counsel for assistance.
  9. Enlist additional experts where needed to plug holes and fill gaps.
  10. Prepare for and carefully navigate the politics.

Even in the era of coronavirus and social distancing, deals can be done. Some of the best deals have been done in times of crisis. With a healthy dose of optimism, positivity and creativity, deals can be identified, marketed, structured and financed intelligently. Employ ingenuity and persistence to preserve valuation, maintain momentum, and execute on time.

 

Louis Lehot is the founder of L2 Counsel, P.C. Mr. Lehot is a corporate, securities and M&A lawyer, and he helps his clients, whether they be public or private companies, financial sponsors, venture capitalists, investors or investment banks, in buying and selling companies. He is formerly the co-managing partner of DLA Piper's Silicon Valley office and co-chair of its leading venture capital and emerging growth company team. L2 Counsel, P.C. is an elite boutique law firm based in Silicon Valley designed to serve entrepreneurs, innovative companies and investors with sound legal strategies and solutions.