With the COVID-19 right in front of us, one of the most pressing questions many of us in this industry is how the pandemic will impact M&A deals. Although we are still at the early stages of the crisis, it helps to look at some of the telltale signs of how the landscape is changing. In this episode, Domenic Rinaldi is joined by Trevor Crow, a well-established M&A attorney who focuses his practice on representing buyers and sellers of businesses and the likes. Here, Trevor shares his insights on what is happening right now with deals on the legal side while letting us know how it has personally affected his business. He then talks about what he is seeing and anticipating and gives advice on what we could do to protect ourselves from any legal issues and to take advantage of the opportunities that will surely come. Take a deep dive into this necessary conversation to learn more about how to take the changes head-on.

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How To Navigate M&A Deals In This COVID-19 Environment With Trevor Crow

Many of my clients are asking how the COVID-19 pandemic is impacting M&A deals. While we are early stages and have not seen the full impact of the crisis on deals, there are some early signs of how the landscape is changing. We’re being joined by M&A Attorney Trevor Crow, who operates a practice in Denver, Colorado. He is a well-established attorney who focuses his practice on representing buyers and sellers of businesses on deals $50 million and under, startup companies with entity selection and formation matters, as well as equity and debt financing transactions. Trevor, welcome to M&A Unplugged.

Domenic, thanks for having me.

Why don’t you start with just a quick backgrounder on yourself and your firm and let’s dive into what’s happening out there right now with deals on the legal side?

I graduated from law school in 2009 in Denver. I came out right in the middle of the recession so that was a tough time to graduate law school or anybody who was graduating from school. It was a tough time to be out there. I started at a firm that I was supposed to do corporate transactional work. I was a summer associate there and had been doing corporate transactional work the whole time. That was where I thought I was going to be. I was excited and the downturn hit and I ended up being in litigation because that was all that was there. I ended up doing more litigation and that lasted for about 1.5 or 2 years.

I was moving into doing more transactional work but ended up moving to a different firm where I was doing solely corporate transactions, M&A deals, and things like that. I bounced around to a couple of mid-sized firms in Denver, and made a partner at one of those in January of 2017. I was a partner for a year when I decided to go off on my own in February of 2018 to start my firm in Denver to do a boutique transactional firm to focus on the corporate and M&A side. We focus on lower middle-market M&A deals. Our wheelhouse is $25 million and under, and we deal with all kinds of industries. We’ve been laser-focused on that. It’s been great.

MAU 54 | COVID-19 M&A Deals

COVID-19 M&A Deals: This COVID-19 environment is not necessarily a terrible time to sell. There’s a lot of money sitting on the sidelines that are ready to come in and purchase businesses.


I imagine the market has been pretty busy for you the last couple of years and then here we are, the pandemic hits.

In March of 2020, we started with four deals going and we’re excited. We were plugging along and doing great. COVID hits and all those deals, except for one that ended up going through and closing, all those deals died. We were sitting there and trying to figure out what we were going to do next. We have existing clients. We were working on lease amendments, forbearance agreements for loans, and things like that. It seemed that all the transactions died for about two months there for us, at least. I know some people were still getting some deals done, but most of our deals went away for about two months and just now starting to come back.

We were lucky our M&A firm had eight deals in diligence when we started the pandemic and closed one and three deals fell apart. We added a new one in due diligence. We’ve got six in diligence right now that are weaving their way forward slowly. People are being very cautious, but still weaving their way forward. We’ll see what happens and the buy-side of our practice has picked up tremendously as you can imagine. You’re probably seeing as well tons of buyers out in the marketplace looking for assets.

I am seeing that. Most of the calls that we’ve received are from buyers that are either putting together funds or taking other steps to capitalize on the market and potentially have a little zone here of a buyer’s where people want to come in and take advantage of that.

When you and I had talked early on, you had some thoughts about how deals are going to be impacted and things that might change from a legal perspective as a result of the pandemic. I’d love to hear your perspective and dive into some of those issues. Tell us what are you seeing and what do you anticipate?

Now, we are in this uncharted territory where we’re post-COVID. There’s a number of things that have changed with deals now that I’m seeing. One is reps and warranties. From a seller side and a buyer side, these agreements have reps and warranties about the business and now we’re having these new COVID reps and warranties. Has the seller taken all steps to ensure that people have been safe and not contracted COVID, whether it be customers, employees, or anything like that? You’re starting to see these reps come in from a buyer side or buyers pushing for those representations in the purchase-sale agreements. You’re seeing the reps that they’ve complied with all law, which is a typical rep but now there’s being added, complied with all law, including any regulations or government mandates on COVID.

There are a lot of things coming into these contracts that we’re going to deal with on that side. That’s one big issue is dealing with these reps and warranties and how buyers and sellers are going to navigate that in the contracts moving forward. What sellers are willing to put in the document and rep too? The other thing is a lot of business owners are from the sell-side have received PPP loans. The question is how do you handle that in the documents? One choice would be that sellers could postpone the closing until they received their loan forgiveness. There’s a problem with that because the SBA can have up to 120 days to sign off on the loan forgiveness. That’s not going to fly for purchasers or sellers to wait that full 120-day period. We got to deal with how to do that. It depends on how the deal is structured, if it’s going to be an asset deal, or if it’s going to be a sale of all the equity interests. It’s going to be a representation that says the loan will be forgiven, but there might be some escrow funds or some indemnity or things like that need to put in to handle that PPP loan as well.

I saw some guidance that indicated that if there was a transfer of assets before forgiveness, it might trigger a default provision in your loan agreements. That is bank-specific. All the banks have different loan documents, but it might trigger a default. On the default, that means you would be on the hook for the entire amount and have to pay that back potentially. Have you heard anything about that at all?

I have heard about that. I need to look more into that because I’m not sure the answer there. It may be lender-specific because these lenders put out their documents for this. There wasn’t a standard form that the SBA put out and so it could be in there. That is an important thing to note for sellers out there is you want to look at the actual loan documents because it’s not a one size fits all there on what the answer is. The developments on this are coming out daily. It’s something that I need to be staying on top of and have been staying on top of. I don’t have the answer to that one.

You can never stop somebody from making a claim or suing you. Click To Tweet

I don’t think anybody has the actual answers yet because the law keeps changing. We’ve had two changes to the guidelines on PPP. Who knows if we’re going to have more? It’s some quicksand and a lot to navigate, but you’re bringing up a great point, which is sellers need to be careful and buyers as well. If the seller took PPP money, what happens if they’re looking to transfer the assets of their business or even the stock? Who’s on the hook? Is there going to be forgiveness? It sounds like coordination with the bank that issued the PPP loan is going to be of paramount importance to get guidance from them and probably written guidance.

Some banks are better than others on this and how on top of it, they are. Getting somebody on the line from the bank and then having that followed up and writing on how this is going to be treated is key in these situations. As you said in a stock deal, or if there’s a sale of equity here, I’m seeing that buyers are pushing for the total PPP loan amount to be held back from the purchase price until that forgiveness has been determined. Buyers should be aware of that especially if it’s an equity deal.

Trevor, I’m interested to get your opinion on this. In an asset transaction, would the buyer assume any potential liability for that PPP in an asset transaction?

There’s not a clear answer to that. I know that’s a typical lawyer answer, but certainly in the documents, if I’m a buyer representing a buyer, I’m going to say, “That’s not a liability that I’m taking on here and that’s solely your liability.” To the extent that banks ever were to come after me for that, then you’re on the hook. There’s certain rules or certain laws in different states deal with this differently, but it’s more common law than statutory law. On the transfer of all assets, if somebody’s coming in and taking over the business, there are potential arguments that people can make on fraudulent transfer and things like that where they could say, “Yes, this buyer is stepping into the shoes. We’re going to come in after them.

For example, if the bank doesn’t forgive the loan and they’re coming after the seller, but the seller has no more assets so now they look to the buyer. Yes, there’s a possibility that they can make that argument. If it’s well-documented in the asset-purchase agreement that the buyer should not have an issue with it, not to mention, you’re going to have the reps, warranties, indemnification provisions in that APA that says, “The buyer is the one who’s going to be on the hook for that,” but there are no personal guarantees on these PPP loans. It’s a good question. If the seller sells all assets, there are no assets to come after. The bank says, “We’re not forgiving the loan.” They don’t have a personal guarantee to go after, so who do they go after? I’m not sure how that’s all going to play out. You can never stop somebody from making a claim or suing you. The buyers should always be aware of that, but if it was well-documented, then there shouldn’t be an issue on their standpoint of being liable for it at least.

There are no personal guarantees. There’s no way the bank’s going to reach beyond to the individuals, but I wonder in the bank documents, I’m assuming you are pledging assets of your business in those bank documents. I wonder if there’s even an issue of can you transfer the assets without the bank’s approval?

That’s going to be on a bank-by-bank basis or looking at the actual PPP loan documents. There are some people who have received these PPP loans without even documentation. It’s what I’m hearing. I haven’t heard that or I haven’t seen it myself, but I’ve heard that from people that some of the early PPP loans came out and were deposited in accounts without any documents signed. I don’t know how people are going to clean that up because certainly there should be some promissory note and loan documents signed for this. It’s very individual on how these loan documents work. That underscores the importance of pulling those out and taking a look and seeing is there a restriction on transfer without bank consent? If so, get that process started early.

Sellers need to look at actual loan documents because it's not a one size fits all. Click To Tweet

We started with reps and warranties and you intimated indemnifications. There’s always been a heightened awareness and discussion around reps and warranties, but it’s probably going to take on a whole new meaning now moving forward, the breadth and depth of those might be enhanced quite a bit, I would imagine.

Yes, I agree. As if that section of the purchase agreement wasn’t long enough. We’re going to be adding a lot to it. It’s uncharted territory for everybody. We’re not sure how lawsuits may come about because of COVID. If somebody gets sick or employee contracts COVID, can they sue their employer? Is that going to be an issue? Is there a valid claim there if a customer comes in and gets sick or contracts COVID, the difficulty is proving that you contracted it from that business itself? How do you prove that? Having the lawsuit out there is a problem. There’s a lot of unknowns and that adds to the reps and warranties or the uncertainty from the buyer side, which usually comes in the form of more reps and warranties of the seller in that purchase agreement.

This is something to be in tune with. One of the things that may be a nuanced issue, but if you have a good lawyer, broker and people on these deals that can take a look at these. The definition section of a purchase agreement is huge because you could ask what you can find hidden stuff or hidden stuff gets added. I mentioned the definition of laws. You might say that there might be a rep that says the seller has operated in material compliance with all laws as a defined term. That laws define term may include things like COVID regulations and things like that. Be aware that it may not just be the body of the document, but the definition section is big in dealing with these issues as well.

I don’t envy attorneys in this post-COVID environment. There’s not enough guidance. There’s not enough clarity. There’s going to be a lot to sift through here. Hopefully, we can get to some level playing field that everybody can operate on. Otherwise, you could see it being the Wild, Wild West with lawsuits potentially after deals get closed and all sorts of issues.

One other issue, Domenic, if you don’t mind, to think about, you can go out and read articles and things about how to prepare your business for sale and what things you need in place from a seller side to make sure that your business is ready for sale. A big piece of that is having your financials in order. The other thing if you have employees is having that whole situation in order, especially now. With work from home, do you have a work from home policy? Do you have things in place for how employees are going to return to work? All those things and coming off, at least as more prepared on that side of it from a seller side, it gives a buyer a lot of assurance that you’ve been operating in compliance with the rules and regulations that governments have put out for COVID. You come off as somebody who’s on top of it and have a business that a buyer might be more attracted to. There are certain other things now from getting a business ready to sell-side that is important for sellers to think about.

MAU 54 | COVID-19 M&A Deals

COVID-19 M&A Deals: If a business is well run, it could be a great time for sellers to sell, especially if they’re not willing to wait it out for another five years to get the financials back in order.


We’ve always talked about the importance of having an employee manual or handbook operations manual. It adds value to a business. It gives people a roadmap. It gives buyers comfort when they buy a business that the business has been well-documented. You can replace players and there’s a playbook to follow. You need to be thinking about how do you add post-COVID instructions and make sure that you’re following state federal laws as it pertains to this. It’s a good point. For M&A Unplugged audience that are owners of businesses, you should have an operations manual. If you do, you should open it up and add COVID-related items so that everybody’s got a roadmap. Trevor, what else do you see? Are there any other major issues that you see post-COVID here as it relates to legal documents in an M&A transaction?

The other thing that I see and this is related to the legal documents. This is more in probably your wheelhouse even is that the valuations for such influx. How do you normalize valuations now? I know different industries have been hit differently because of COVID. If your industry has been hit or your business itself has been hit particularly hard by COVID, how do you come up with a valuation? How do normalize the financials in a way to send to a potential buyer that they can get comfortable with and create a valuation off of? What that’s led to or will lead to, and this is something that’s changing by day that we’re dealing with, as deals are coming back online for us at least, is how do we purchase price adjustments?

Is there going to be purchase price adjustments because of this valuation or how do you make reps on financials that when you have COVID right now, dealing with in this COVID environment, you have certain reps on your financials. If things don’t come back and the business never picks up, then there’s going to be more scrutiny on what was provided in those financials. That’s when there are red flags raised for buyers. “You were doing this. You were doing X back then, or at least you told me you were doing X in 2019. In 2020, you’re doing Y. I bought the business and it’s continuing to be low.” There might be more scrutiny coming back there from the buyer as well as now with deals getting them now. There’s going to be maybe some concessions on purchase price adjustments or earn outs, or other ways to structure purchase price.

I see earn-outs coming back to the forefront in a big way, where there are big gaps in what a seller wants versus what a buyer’s willingness to pay. If the seller believes the business is going to come back, burnouts are going to be a key way to bridge that value gap. It’s either that, or as a seller, you’re going to have to hold onto your business and wait for it to recover, and who knows how long that’s going to be. The interesting thing about that, Trevor, that we’re seeing is there’s still a very strong appetite for deals. There’s still a ton of money out there. Interest rates are incredibly low. The capital markets have remained fairly open for M&A deals. As a seller, you have to weigh. Do you want to continue to go forward or if you’re ready to leave your business, do you leave it not quite the way you had hoped? If you believe the business will come back, you can fix that through an earnout or a holdback or an escrow or things like that.

I would predict the same thing that there’s going to be more of that coming. You’re right that this is not necessarily a terrible time to sell. There is money out there. Certain industries have been hit less hard and become more valuable in the fact that they show that they have staying power and can survive a storm like this. There’s private equity money. There’s a lot of money sitting on the sidelines that are ready to come in and purchase businesses. If it’s well run, it could be a great time for sellers to sell, especially if they’re not willing to wait it out for another five years to get the financials back in order.

Our experience pre-COVID was there were not enough deals on the market for the number of buyers that were out there. The number of deals is going to decline for sure. I don’t see where the number of buyers has declined. We might wind up with more buyers in the marketplace chasing even fewer deals. It could be an interesting time for sellers who’ve been on the fence about whether or not this is the right time to sell. Trevor, this has been great. You’ve brought up some key points that people need to think about in this post-COVID environment. Let’s hope we continue to recover as a nation, our businesses recover and we can get back to some equilibrium across the board. Are there some last-minute thoughts that you’d like to share with the M&A Unplugged Community?

The main points here, just to recap a bit on what we talked about. From a seller side, get yourself in order from the COVID side. Maybe it’s on the new checklist that is coming out on how to prepare your business for sale, but it should be on the checklist now, what steps have we taken to handle COVID in our company? Do we have work from home policies? Do we have things in place to deal with COVID? That’s one key area and that’s going to help market that business for sale in the future.

The next thing is to be prepared for new reps and warranties in that purchase agreement about COVID and what steps you’ve taken and compliance with government regulations and things like that. That would be another thing to think about and be prepared for. The last thing we’ve talked about is this purchase price and how can you navigate a purchase price that’s going to make a buyer comfortable to purchase a business in this environment. That may be through an earnout to bridge that gap. It may be through a purchase price hold back or something like that. Be thinking of that because that also will make the business more marketable and may get you a higher price.

Certain industries have been hit less hard and become more valuable in the fact that they have the staying power to survive a storm. Click To Tweet

Trevor, I appreciate that. If people in the M&A Unplugged community wanted to get in touch with you, how could they best reach you?

My website is www.Crow.legal or you can email me at [email protected]. You can email me here or call me at (720) 230-7123. We do lower, middle-market M&A deals. We’re based in Denver, but we would do deals all across the US. Anybody who wants to bounce ideas or have questions, I’m happy to take your call or email and talk with you.

Trevor, thank you so much. I appreciate you being here.

Thanks, Domenic. This was fun.

If you would like to learn more about the process of acquiring or selling a business, please visit our website at SunAcquisitions.com or feel free to reach out to me at [email protected]. I look forward to seeing you again in the next episode. Until then, please remember that scaling, acquiring or selling a business takes time, preparation, and proper knowledge.

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About Trevor Crow

MAU 54 | COVID-19 M&A DealsAfter practicing at several larger law firms, Trevor Crow founded Crow Legal LLC to deliver sophisticated and practical legal solutions for companies looking for an alternative to large law firms. Most of his clients are small to mid-sized companies. From working at prestigious Denver law firms to opening his own practice, Trevor has represented an array of businesses, founders, and investors for nearly 10 years. He focuses on business transactions, including the purchase and sale of businesses, entity selection and formation, equity and debt financing transactions, complex joint ventures, and commercial contracts. In addition, he counsels business entities and individuals on tax planning related to these business transactions.

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