Capital MarketsCash & Working CapitalCOVID-19

Pandemic Reveals the Haves and the Have Nots: Asia Report

By May 7, 2020 No Comments

Examples of the varying effects lockdowns had on businesses, and how they’ve responded.

The coronavirus pandemic has provided more proof that crises affect some companies far differently than others. The reasons include what industry a company is in, its business model and how much cash it has on hand—the haves and the have-nots.

Perhaps less expected is that business units within the same company may weather a storm better than others. All this and more emerged in discussions among finance practitioners in Asia participating in a NeuGroup virtual meeting in mid-April. Here are some takeaways:

  • Members who work for cash-rich companies expressed interest in making strategic acquisitions as asset prices declined in response to the pandemic. Potential deals in this environment must be evaluated not only based on price but the degree to which an acquisition will deplete the buyer’s cash pile.
  • Asia business units planning to provide funds to parent companies had different experiences. For at least one company, the process was relatively easy, thanks to its strong relationships with local partners. Others faced difficulties getting approvals from external auditors and clearance from tax authorities.
  • Companies without significant cash surpluses have made significant cuts in capital expenditures and discretionary expenses. They have also drawn down or increased bank lines of credit.
  • A member from a consumer goods company described declining sales of its products that are distributed to restaurants but solid sales of products consumed at home and purchased in convenience stores.
  • Those drugs requiring face-to-face-meetings between pharmaceutical salespeople and health care providers are not selling as well as other drugs companies produce.
  • Lockdowns—no surprise—put a huge dent in sales of companies that rely on foot traffic.
  • Companies with business models that have easily transitioned to remote work such as consulting are doing well and, in some cases, have seen an uptick in business.
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Ted Howard

Author Ted Howard

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