Only Fools Rush In: Conducting COVID-19 Due Diligence
Like almost every facet of life, the M&A and private capital raising landscape in Australia has been substantially impacted as a result of COVID-19. Many non-essential transactions have been put on hold as companies and their directors have faced a level of commercial and economic uncertainty not seen before in our lifetime.
As we start to progress through the Government’s 3-stage plan to re-open the economy, the deal landscape in Australia is slowly starting to stabilise, giving investors the confidence they need to take advantage of opportunistic acquisitions and investments (particularly in respect of businesses struggling under the weight of COVID-19). Local investors also now have an opportunity to take advantage of the Government’s efforts to curb foreign investment and proceed with transactions from which their foreign competitors are precluded.
Parties that are looking to make acquisitions and investments in the current climate should ensure that they take the time to conduct a more comprehensive due diligence process than they would have pre- COVID. This is particularly the case considering the array of legislative and fiscal measures that have been introduced by the Australian Government over recent months in order to prop up Australian businesses. Reliance on these measures may mask a company’s true state of affairs, making it difficult to determine the real impact of COVID-19 from standard due diligence investigations alone.
Here we have set out some COVID-19 specific considerations that should be kept in mind when undertaking legal due diligence.