FORMING PARTNERSHIPS IN A PANDEMIC

September 30, 2020

Six months into the global pandemic, with little business travel happening, it’s understandable that people in our industry are finding new ways to get business done. Professionals have gotten comfortable with video conferencing, and as time drags on it gets easier and perhaps necessary to justify moving business forward without in-person meetings and on-site visits.

We speak with lots of gatekeepers and allocators about this and, while some organizations are more aggressive than others, a general consensus has formed. Approvals and hires in progress before the pandemic should proceed, as should engagements with known entities. New engagements with well-known organizations can proceed. Potential engagements with unknown entities are likely to wait until in-person and on-site visits can resume. Of course, as recent articles have discussed (for example, “Consulting Giants Get Comfortable with Mgrs They Never Met in Person“), the longer travel moratoriums remain in place the more likely the goalposts are to move.

This may be an appropriate shift in the allocator world, where decisions can be reversed relatively easily, but it’s a different story in the M&A world. It’s a lot easier to split up when you’re dating; once you get married there’s a deeper spirit of commitment as well as contractual complexity. Given it’s a tougher knot to untangle, it should warrant greater care going in. That said, we are surprised to see M&A deals getting done over Zoom in this environment, with little or no in-person interaction. Activity in the wealth management space in particular is at or near an all-time high. We see lots of banker-led activity with tight bidding timelines and high table stakes, and these deals are getting done. In our view the atmosphere is distinctly more transactional than relational.

We at Rosemont have held off on underwriting any new partnerships during this pandemic. This stems in part from our usual conservativism—we tend to move deliberately—but also from an abundance of caution given the environment. Aside from considerable uncertainty in the macro environment (global pandemic, potentially volatile election cycle, etc.), we simply won’t partner with people we haven’t met face-to-face a number times. We want long-term relationships with high-quality people and sustainable organizations, and only with those that want the same of us. Figuring that out requires time together, in person and in a variety of settings and combinations. We don’t know any other way to determine and develop confidence in the durability of character, culture and functional strength.

Industry practices are likely to continue to evolve as the pandemic wears on. Some will be temporary necessities and some will change for good. One thing that won’t change, however, is our desire to get to know people very, very well before we partner, and we believe that can only be done in person.