Differentiated diligence after COVID-19
As dealmaking resumes, private equity and other buyers have an opportunity to earn outsized returns—as was the case on well-timed transactions after the 2008-09 recession. But finding value will require differentiated diligence. As in the last recession, there will be many smaller, messier deals—distressed assets and carve-outs. Finding “diamonds in the rough” will be even harder this time because of the economic disruption caused by the COVID-19 lockdown, which makes it exceedingly difficult to find true value in a sea of noisy data.
This makes the use of advanced diligence techniques essential. In this paper, we share six techniques that will need to be emphasized even more in the post COVID-19 deal world. These techniques help dealmakers gather intelligence that routine diligence can’t provide by seeing beyond reported numbers and expert insights to discover true sources of value (and barriers to value capture). Players that use differentiated diligence after COVID-19 can hope to match or exceed the returns that top players achieved after the last recession.
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Additional KPMG Insights
COVID-19 has exposed vulnerabilities in our economic, social, and health systems. Most economies are likely to see GDP declines in Q2 that dwarf the slowdown experienced during the global financial crisis in 2008-2009. Many industries will be forever changed by shifts to digital modes of operating during COVID-19. KPMG estimates that U.S. growth will likely take until 2021 to be positive on a year-over-year basis and until after 2024 to reach 2019 levels. KPMG’s Office of the Chief Economist is monitoring the economic impact of COVID-19 daily and provides frequent updates to this economic analysis.
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