Not only has the COVID-19 pandemic caused businesses to change during the pandemic, but it has forever changed the way business will be handled in the future. Businesses will continue to need to pivot and adapt to new ways of conducting business and researching unchartered legal matters arising as a result of COVID-19.
The Planet MicroCap Showcase recently hosted a virtual panel on COVID-19: Legal Ramifications for Small Companies. Lynne Bolduc of Fitzgerald Yap Kreditor LLP was one of the panelists for this virtual panel.
A summary of Lynne’s points made during the presentation are:
- Transactions are still getting done
- Have realistic expectations and be reasonable
- Disclose risks specifically
- Examine your contracts for cancellation clauses and renegotiate them if possible
You can view the entire presentation here:
Here are excerpts from the transcript for pertinent key points of Lynne’s presentation:
4:36: Moderator: What kind of transactions have you handled during the pandemic and how did they go?
4:42: Lynne: I had three acquisitions pending when the pandemic hit; one of which closed on April 1st, which was a $50 million sale of a private company – but the buyer insisted on a $350,000 “COVID-19 adjustment” to the purchase price. My seller accepted that just to get the deal done in these times of turmoil. So that one did close, albeit with a $350,000 haircut.
5:17: Lynne: The other two acquisitions were put on hold to May and June respectively. I was also working on two IPO’s – one of which was about to go effective, but the underwriter put it on hold until June.
The 2nd IPO is moving forward and the underwriter is scheduling a virtual roadshow in May, so that’s new and different.
We are also working on several private placements. The real estate private placements have been put on hold due to trouble getting financing. However, we are working on one private placement for a hand sterilizer product, and that one is doing better than ever.
I predict what we may see is what I saw in the Great Recession in 2007. We saw fewer IPO’s because people didn’t trust the markets, they were too volatile, but we had more private offerings than ever because people still wanted and needed to invest their money. That may happen here in the coming months.
21:49: Moderator: What are you advising clients encountering disclosure issues?
21:57: Lynne: Companies need to realize disclosure cannot be generic; it has to be specific and has to relate to your industry and business and how it affects you. I am seeing a lot of smaller companies just throw in a generic COVID-19 risk factor and that just doesn’t work.
29:34: Moderator: Deals are getting done as far as I can tell but I would like to get an angle from you on what are you seeing on the M&A side?
29:43: Lynne: The liquidated damages clause that occurred in the example I gave earlier in the $50 million-dollar deal was sort of interesting – they decided in advance how much they were going to haircut the purchase price for the current pandemic. I also do worry about the earnout provisions and indemnification issues.
35:59: Moderator: We were pretty busy to begin with, but you layer in being remote and that adds a special set of circumstances of course – just curious as to your experiences lately?
36:15: Lynne: I have been working with a lot of clients to reexamine and perhaps renegotiate their force majeure clauses (clauses that excuse non-performance of a contract). We represent a lot of companies in the conference business. When the pandemic first hit, of course, all the conferences were canceled. So clients were calling and asking, “We can’t hold our conferences. Does our existing force majeure clause let us out of it?” So those clauses are being examined to determine whether they apply to a pandemic. Similar to the time of 9/11 when many events were canceled, we examined those same clauses but for a different reason. Acts of terrorism were not previously included in force majeure clauses, but they are now. I predict that pandemics will also now become commonplace in the laundry list of events excusing performance under a contract.