M&A Risk Management in the Time of COVID-19

Diana Kenneally is an Escrow specialist with more than 25 years of experience in the financial services industry. Serving clients across the nation, she understands the importance of precision and speed to execute successful Escrow transactions. With a strong focus on performance, Diana brings excellent client servicing skills and provides banking solutions designed to meet your specific business needs.

ACG Boston: As an experienced M&A Escrow and Agency professional, what do you make of any emerging challenges resulting from the current health crisis?

Diana Kenneally: Though the risks are heightened right now, in many ways they aren’t new; they’re mostly the same pre-COVID challenges. The most significant change in our “new normal” is the new limits placed on the personal interactions of buyers and sellers. For example, touring a seller’s operations is an essential part of a buyer’s evaluation process, because it affords the opportunity to meet in-person with counterparties. An in-person interaction allows a buyer to assess the management team, learn from non-verbal cues, and begin to develop what is hopefully a long-lasting relationship.

ACG Boston: And what about dislocation in the finance market as a result of COVID? How is that affecting M&A risk management?

DK: It’s certainly one of those risks heightened by COVID-19. Counterparties are understandably experiencing greater concern about potential negative outcomes of these uncertain times, such as Force Majeure or – in the case of M&A finance – a trigger on a material adverse change (MAC) clause.

ACG Boston: So definitely some shifts happening as a result of coronavirus. How are you seeing the market respond to these concerns and issues?

DK: Going back to basics and relying on tried and tested risk management tools can really help mitigate risks. So, for example, if you’re working on a cross border/currency deal then a currency swap. Ensuring you are in agreement with your lenders about MAC events and, of course, developing air-tight escrow arrangements – something near and dear to my heart. These arrangements should manage the multiple risks, especially post-closing contingent risks, that will insulate the parties from challenges that perhaps were not fully identified due to a more difficult due diligence environment.

ACG Boston: And I take it you have developed arrangements like that before?

DK: Absolutely! The focus of the Escrow and Specialized Services team at Texas Capital Bank is on applying our vast experiences from all situations, types of transactions, and market disruption events. We bring those experiences to bear to drive the most effective solution to meet our client’s risk and transaction management needs. Ultimately, we provide the means for parties to transact in a controlled environment. For me, it’s always fun to engage my knowledge and experience, as well as the resources of the bank’s Escrow team to help our clients get their deals across the finish line.

ACG Boston: Thanks Diana, this was very enlightening. We expect to hear about the great impact you will make on the New England M&A market. 

Learn more about Texas Capital Bank and the Escrow & Specialized Services team at www.texascapitalbank.com. 

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Texas Capital Bank, N.A.