On January 30th, 2018, the Wall Street Journal reported the formation of what would later be called Haven under the headline,
Triple Threat: Amazon, Berkshire, JPMorgan Rattle Health-Care Firms
“The companies said the venture would be “free from proﬁt-making incentives and constraints” and would develop technological solutions to provide simpliﬁed, high quality health care for their hundreds of thousands of U.S. workers, but they oﬀered few other details [emphasis – and foreshadowing – added]” .
How many times have we been here? It’s only been a year since We Work was valued at $47 billion, only to see its value crash land 70% in just 30 days.
Now we have DoorDash, one of the companies that won the pandemic.
Check out this madness.
Glad we asked it.
No doubt this is a fluid situation. In fact, given what has transpired in just the past week, our answer today could very well go back to the future in 30 days or so (more on that below).
But right now?
There is evidence – mostly anecdotal at this point – that the M&A world is beginning to awaken from the Big Sleep.
Last summer, we noticed a peculiarly interesting article about what had become a runaway lending environment. Debt capacity had risen as high as 6-7 times EBITDA. What’s more, EBITDA was fast becoming a proforma, go-forward, if-everything-goes-perfect figure. In other words, a substantially puffed up version of the truth that effectively added another 1-2 turns of EBITDA that lenders were willing to put up.
Remember the run-up to the global recession when lenders were tripping over themselves to get in on a mergers and acquisitions climate that was positively giddy?
When debt capacity, typically expressed as a multiple of a company’s earnings before interest, taxes, depreciation, and amortization reached milestone levels, eclipsing the “6X barrier” (as coined by PitchBook)?
When the term “covenant-lite”, describing loan agreements with fewer protective covenants for the buyer and less restrictions for borrowers, became a thing?