14 Jul Impact of COVID-19 on Business Broking Industry

As the COVID-19 crisis deepens, and the number of positive cases and casualties continue to increase rapidly, governments across the world are enforcing rigid lock-down and social distancing measures. With the engines of economic growth coming to a halt, the pandemic has been transformed into an economic crisis, leading the global economy towards recession. India is no exception, and the business broking industry in India is sure to witness a setback at least in the short-term.

Impact of the pandemic on MSMEs

The impact of the pandemic will be felt more on the micro, small and medium enterprises, which may not have the capacity to withstand a prolonged economic slowdown. A lot of defaults can also be expected from some of the smaller businesses. As a result, most of the MSME’s and small business owners will be willing to sell their businesses at a price lower than the fair price of the business. This would create an urge among the buyers who may have adequate resources to run and manage a business but lacks a business idea and a proper business model. This is a good opportunity for them to buy distressed businesses in the time of recession at a discount. As a result, a lot of business broking deals are expected to happen in the near future which will create a plethora of opportunities for business broking platforms. This is the right time for these platforms to start advertisement campaigns and follow an aggressive marketing approach to expand their network of potential buyers and sellers.

Impact on Source of Revenue

Point to keep in mind is that a major source of revenue for this industry is generated via providing a platform as a service to the multinationals and boutique firms in the financial services industry such as investment banks, PE/VC firms, etc.

In essence, these platforms can be thought of as the IT vendors to the investment banks in the mergers and acquisitions landscape. As per the industry reports, growth in the  software industry is expected to drop to 4.1% due to the impact of COVID-19 pandemic, as compared to growth rate in 2019 of 16.7%, hence, enterprises relook at their buying decisions owing to an increased focus on profitability. But the growth in IT services is expected to be almost flat at 6.9% as enterprises look at maintaining the status quo on IT services contracts. Hence, although IT spending will be impacted, specific solutions such as conferencing and collaboration, secure endpoint and network management, CRM, cloud storage, backup & recovery solutions, and remote support services will witness a steady rise amidst the crisis. The M&A enterprises are expected to invest in solutions that enable their remote workforce to remain productive without service disruptions. This could be a great opportunity for the business broking platforms to follow an aggressive marketing approach to lend their services to M&A enterprises i.e. these platforms allow the users to work through the entire M&A process starting from deal prospecting to due diligence.

How to Manage COVID and Post-COVID days

It has been noticed that this industry is still at a nascent stage and many people who can actually be the potential customers are not aware of such online marketplaces to buy and sell businesses. Hence, in the current lockdown period, the business broking platforms should also focus on running the online advertising campaigns on social media to spread the awareness of their business model amongst the potential buyers and sellers. Also, they should launch free of cost edification initiatives on their platforms as well as on blogging websites, social media applications, etc. regarding the procedure and the intricacies involved in buying and selling a business and how those intricacies can be made easier if the online broking platforms are used for buying and selling a business. This would increase their network of potential buyers and sellers and make them ready for targeting and providing their services to the customers in the post corona world.

Everything being said, there can be a little setback during the lockdown period and the period immediately after that for the business broking industry due to delays in the process of the ongoing deal and the reluctance of the buyers to lose their cash positions as there are a lot of uncertainties associated with this pandemic. But in the time span of 4-5 months post the lockdown period, things will tend to get back to normal and even better than before for this industry.