Featured Insights

Special Purpose Acquisition Companies (SPACs) have been the center of the capital markets stage, and with good reason. Private equity firms, hedge funds, and other financial institutions are looking to SPACs as a flexible and efficient way to acquire companies. On the other side of the equation, target companies see SPACs as a simpler path to the public market, with enhanced valuation certainty.

Capital structure “portability” provisions, which allow a borrower’s loans to remain outstanding despite a change of control event, may be coming to the middle market in 2021. The acquisition finance landscape post-COVID has been marked by intense competition – perhaps more intense than pre-COVID. As negotiating leverage has tipped in favor of private equity sponsors, more lenders are giving up their rights to have loans automatically repaid if the borrower is acquired.

As COVID-19 continues to interrupt everyday life across the globe, lenders have been feeling the impact on their borrowers. After a long benign credit cycle, many lenders saw a significant uptick in covenant breaches, waiver requests, and defaults on deals originated pre-COVID.

Closing in on one year since COVID-19 first appeared, uncertainty has been, and remains, a constant theme. The broader economic picture seems tenuous at best, but M&A activity rebounded strongly in the last quarter of 2020, with all signs pointing to further resiliency in the period ahead. Still, while transaction volumes have recovered, it may be a long time before we see a return to some sort of pre-pandemic normalcy.

While most of the risk resides with PPP borrowers, there is also a concern among lenders, whether real or imagined, that the SBA might refuse to honor its guarantee if a PPP lender errs in authorizing transactions that are below change-of-control thresholds requiring SBA consent. This somewhat amorphous concern has led to a heightened level of lender scrutiny across the board, introducing delays to the consent process.

The fallout from the pandemic has not fully developed, but it is clear that it has reached across all segments of the economy. Configure Partners occupies a center seat in the deal ecosystem…