Would you delay signing PS agreement due to market fluctuations?

March 02, 2020

by a searcher from Harvard University - Harvard Business School in Arlington, MA, USA

I'm sure most people are aware of coronavirus and its recent effects on the stock market. I'm nearing signing a PS agreement and am contemplating asking for an extension from the seller (30 days?) just to see what the market and interest rates will do.

Are others in similar situations now or have been in the past? How would you deal with it?

Assume that the seller doesn't have ready buyers lining up and that the deal will likely still be around at the end of the extension period.

Reply by a searcher
from Harvard University in Arlington, MA, USA

Quick update that I've asked for a 30 day extension and the seller has agreed. This business has an existing client base of large hospitals which is quite tied into the coronavirus. The business is actually quite recession proof. It's the fact that we're dealing with a healthcare issue and they have hospitals as big clients that's making me delay. Why go in at a time when I might have to deal with crisis management on top of owner transition?

I also don't think that loans are going to dry up... lower rates are supposed to stimulate loan volume.

Reply by an investor
from Thomas A. Edison State College in Naples, FL, USA

How big is your transaction? Will a 50 or 100bps cut (or increase) change the major economics of your deal? If 50-100bps change kills your deal you probably have an overpriced deal. I'd just extend with them if you're wary but the macro aspects of the economy wont likely impact the day-to-day for most smaller companies unless theyre heavily tied to trade or import/export.

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