COVID-19 has devastated the mergers and acquisitions market, according to Brentwood Capital Advisors' first-quarter 2020 market report.
Here are five things to know:
1. Private equity firms have indefinitely delayed most deals that were in the process of closing, and the few deals that did close had to be drastically restructured.
2. The COVID-19 pandemic has caused several companies to withdraw their full-year broadcasts, which makes it "nearly impossible to value the company and to attract the requisite debt and equity financing."
3. Lenders are holding on to their funds, which has lowered valuations and decreased the chances for deals to close. Where deals used to close at 5- to 6-times cash flow, lenders are rarely approving more than 2-times cash flow.
4. The full effect of COVID-19 will likely be felt through the second quarter of 2020, with firms transitioning from exploring new opportunities to assisting their current holdings.
5. Because of this, Brentwood feels M&A activity will remain low throughout the rest of 2020.
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