Dealmakers Start Using Drones to Help in Completing Transact…

Apr 11, 2020 12:29 AM EDT

Dealmakers are starting to use drones to help facilitate transactions while observing social distancing. According to insiders, the company Coty Incorporated and suitors for Coty’s professional beauty unit, which can cost up to 8 billion USD, are now considering the use of flying drones across their manufacturing facilities. It is a means of keeping Coty’s divestiture plans, which include the selling of the OPI and Wella brands, on schedule despite the lockdown measures that prevent person-to-person meetings in its host countries.

Video and phone calls and virtual data rooms can facilitate negotiations and meetings. However, site visits are still necessary for many deals such as chemicals and mining, because bidders need to see the actual mining pits, factories, and manufacturing plants to assess their real value accurately.

Endeavour Mining Corporation is a gold miner that was able to seal an all-share deal of US$690 million for Semafo Incorporated last March because they were able to conduct on-site visits and other physical necessities before the COVID-19 pandemic.

Because of the quarantine, dealmakers and advisers are now forced to be creative in keeping the buying and selling processes ongoing. Deals have been increasingly canceled, with more companies choosing to concentrate and their resources in trying to continue existing operations instead of proceeding with expansion.

Recent years have seen drones being widely used by many industries. Walgreens Boots Alliance Incorporated and FedEx Corporation have tested them for deliveries. They are being used for inspecting cellular towers and photographing houses for sale.

Unfortunately, drone technology is not yet mature enough for routine use in places with flying aircraft. They have to be used only within the operator’s sight and at a low altitude.

Drones that facilitate M and A transactions will be innovative. Hedge funds are gaining an edge by using drones to view parking lots for gauging retail traffic and in lumberyards for predicting prices of wood.

Datasite Global Corporation chief revenue officer for Europe, Middle East & Africa Merlin Piscitelli said that drones have also been requested by private equity firms to provide proof of buildings, assets, and numbers and sizes of factories. Datasite is among companies providing virtual data rooms. Piscitelli adds that these firms believe drone footages can help them increase early-stage engagement and widen market outreach in buying & selling assets.

An earnings report states that Coty owns production facilities all over the globe. In countries where it operates, social distancing has been imposed.

In general, Europe has more lenient drone restrictions compared to the US. Bidders who want to view Coty’s facilities in the US using drones have to abide by strict FAA regulations that require users to keep drones within sight and not higher than 400 feet or 121.9 meters.

According to insiders who asked to remain anonymous, Coty still plans to push through with its divestment. Still, the process is hindered by logistical issues, a decline in business, and tight markets. Coty previously announced that it expected to finish the selling process by summer. Salon shops are deemed non-essential and have been forced to close in a lot of major cities. They are Coty’s largest customers.

Last month, Bloomberg News reported that Henkel AG, a German-owned shampoo maker, and KKR&Co., its buyout firm, have proceeded to the bidding’s second round.

Coty Inc.’s professional beauty unit earned a revenue of US$529 million, or around 23% of its total earnings, in the last three months of 2019. Coty expected net revenue to decline by roughly 20% for that quarter.

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