By: NPZ Law Group, P.C. 

The Department of Homeland Security (DHS) and Immigration and Customs Enforcement (ICE) have announced a further extension of the flexibility in complying with the in-person requirements related to Form I-9 due to COVID-19. The temporary policy was originally put in place for the period of March 20, 2020 until May 19, 2020. It was extended until June 18 and now it has been extended another 30 days.

DHS’ temporary policy will defer the requirements for employers to review Form I-9 documents in-person with new employees where employers and workplaces are operating remotely due to COVID-19. Instead, employers may inspect the Section 2 documents remotely (e.g., over video link, fax or email). Employers should enter “COVID-19” as the reason for the physical inspection delay in the Section 2 “Additional Information” field.

The original announcement stated the temporary policy applied as follows:

Only applies to employers and workplaces that are operating remotely. If there are employees physically present at a work location, no exceptions are being implemented at this time for in-person verification of identity and employment eligibility documentation for Form I-9…. However, if newly hired employees or existing employees are subject to COVID-19 quarantine or lockdown protocols, DHS will evaluate this on a case-by-case basis.

It appears on first blush this new caveat to I-9 compliance is only applicable “where employers and workplaces are operating completely remotely” – meaning all the employer’s employees are working remotely. However, this exception may apply if only a portion of the workforce is working remotely due to COVID-19. The phrase, “employers and workplaces”, seems to imply DHS will be looking at the particular workplace. If not, why did DHS use both “employers and workplaces” instead of just employers. Thus, if an employer has one workplace open while others are closed due to COVID-19 “Safe at Home” orders, one could arguably allow an employer to use remote verifications for new hires at the closed locations, where all employees are working remotely. Why? Because that specific workplace is operating remotely.

Once normal operations resume, all employees who were onboarded using remote verification, must report to their employer within 3 business days for in-person verification of identity and employment eligibility documentation for Form I-9. Once the documents have been physically inspected, the employer should add “documents physically examined” with the date of inspection to the Section 2 “Additional Information” field on the Form I-9, or to Section 3 as appropriate. Employers who avail themselves of this option must provide written documentation of their remote onboarding and telework policy for each employee. This burden rests solely with the employers
If you should have any questions or need more information about the ways in which the U.S. Immigration and Nationality Laws may impact you, your family, your friends or your colleagues, please contact the U.S. Immigration and Nationality Lawyers at the NPZ Law Group – VISASERVE – U.S. Immigration and Nationality Lawyers by e-mailing us at [email protected] or by calling us at 201-670-0006 (x107). You can also visit our Law Firm’s website at www.visaserve.com
​

By: Joe Imperato, Sr., Partner, XSolutions Consulting LLC
​
COVID-19 taught us that we need to be better prepared the next time disaster strikes. Resilience, through defense-in-depth is the key. Below are eight tactics to improve your company’s resilience:
​

1. Hardware and software Firewalls. Use a combination of hardware and software firewalls. Make it difficult for malware to enter your network. Hardware firewalls act as guards to your entire system, while software firewalls on individual PCs act as gatekeepers. They should all be on and active. Update and review the settings on all firewalls from time to time to make sure they are up to par.
2. Antivirus (AV) programs are a must. AV won’t stop zero-day attacks, but they’ll help with the majority of malware. Users should never run without AV protection.
3. Use Antimalware programs. With strong AVs, this step may not be necessary. However, antimalware programs can help keep online assets clean.
4. Backup, backup, backup. Phishing attacks hurt many businesses during the pandemic. Companies that failed to back up their data were pushed to the brink. Use a Hybrid-Cloud Business Continuity solution for the best results.
5. Incorporate the Cloud into your IT setup and backup planning. COVID-19 forced us to retreat to our homes to conduct business. Move parts of your IT to the Cloud. Businesses should use Office 365 for increased resilience. Note – make sure you backup your Office 365 data because Microsoft does not.
6. Educate your employees. There are many good training programs out there. Continuous learning is the key. Training should not be a one-time shot. At a minimum, staff must be able to recognize common phishing attacks.
7. Include Home Networks in your Disaster Planning. The pandemic showed that many home networks were not up to the task. Use this as a learning experience. Consider upgrading employee home networks before the next disaster.
8. Have a written Backup Disaster Recovery Plan. When disaster smacks you in the face, winging it is not a good idea. If you do not have a written plan, make this a priority. It’s important to your company’s survival. After you have a written plan, test it often, and revise as necessary. If you don’t have a written plan, use our free BDR template (no registration required).

Contact us if you need help: call (845) 362-9675 or email [email protected].

By: Joshua Levering, SIOR, Senior Vice President, NAI James E. Hanson

The swift spread of COVID-19 has shaken up every aspect of our daily lives. With millions of Americans now working from home and companies facing a dire financial picture in the months and years to come, the impacts on our regional office market could be deep. Experts anticipate that by summer our economy will be on the path towards reopening, but what will that new normal look like for the office market in northern and central New Jersey?

Over the past several years, our area’s office market had steadily diverged, with high quality, well-located office product seeing high absorption and low-quality, functionally obsolete space struggling to find tenants. Although the overall vacancy rate hovered in the low to mid-teens, that did not paint the whole picture as low-quality space drove a high percentage of the vacancy rate.

Right now, COVID-19 has placed a pause on that trend as no new deals are coming to the market for office product of any quality. However, over the next 6-12 months, as the economy picks up once again. I expect two trends to emerge:

1. Tenants will be taking a deeper look at their business models and workspaces to make sure they still “work” in a post-COVID-19 world

Many companies are learning for the first time that they their employees can work from home with minimal disruptions to their day-to-day business. Additionally, concerns about social distancing and building design will reshape the prototypical office space over the next several months. Due to both reasons, I expect tenants to take a much deeper look at their real estate needs and sharpen their pencils to make sure the numbers and spaces still work for them. For owners of any office building, this will inevitably make those next renewal conversations a bit tougher and could drag out new lease negotiations.

Through this deeper level of analysis and restructuring, I can also see many office tenants learning that they can save some money on real estate costs through decreasing their space or eliminating it entirely. But not every employee wants to work from home or is able, so most companies will likely still need physical locations.

2. Decreasing demand for office space and the move towards a decentralized office model will deepen the gulf between quality and non-quality office product

With the decreasing overall need for office space, the decline of lower-quality office product will only hasten. For the owners of these types of buildings, the best advice I can give is to crunch the numbers to see if aggressive repositioning works or take a look at how you can redevelop the property into an asset class in higher demand.

However, higher-quality buildings will be well-positioned as we emerge from COVID-19. As more employers adopt work from home policies, they will be looking to decrease their space allotments but might be looking for less space in a better-quality building.

The appeal of higher quality, well-located buildings could also be influenced by a move to decentralize office space similar to the hub and spoke model we have seen in the industrial sector.

As companies recognize that they ultimately only need their offices for customer servicing operations and other limited in-office needs like meetings, they could look to create smaller regional offices versus one larger headquarters. The advantages of this approach are two-fold – shorter commute times for those that have grown accustomed to working from their home while more local offices will also accommodate for employees who might remain leery of using mass transit to commute into New York City or other large urban centers. Secondly, companies would have smaller, more flexible real estate footprints that can quickly adapt with their businesses. This presents owners of well-located, high-quality office space with a great opportunity to diversify their tenant base and move to a multitenant approach if they have not already.
​
Over the next several quarters, the office sector is primed for drastic changes as the way we work undergoes a dramatic transformation brought on by COVID-19. Navigating this new normal will not be easy for either tenants or owners as uncertainty will continue to be a defining feature of the market for quite some time. With decades of experience in closing office transactions in a variety of economic conditions, the team at NAI James E. Hanson stands ready to provide counsel to clients to help position them for success in the post-COVID-19 world. To learn more about our office leasing and sales services, please contact me at [email protected].

​By: Cynthia Romano, Principal, Global Director, Restructuring and Dispute Resolution & Margaret Shanley, Principal, Transactional Advisory Services Practice Leader, CohnReznick

COVID-19 has wreaked havoc worldwide on an unprecedented scale. The coronavirus threatens lives while the measures necessary to stop its spread threaten livelihoods. This combination has forced a vast number of businesses into financial distress and will continue to impact businesses for months and years to come. 

As a result of the pandemic, there are three categories of companies available for transactions: companies that have benefited from the crisis (value likely to be up), those that were healthy pre-pandemic and are now stressed, distressed, or shut down (value likely to be down), and companies that were teetering or distressed pre-pandemic and are now even worse off (value even further down). 

Because the COVID-19 crisis and the resulting distress are not geographically restricted, industry-specific, or size-specific, private equity investors of all stripes on both the buy and sell side of M&A transactions need to prepare for a high-risk, high-pressure period in an economy so unique that it’s all but impossible to predict accurately based on historical models or previous recessions. Even as the market has flipped from a seller’s market of high valuations and fierce competition for fewer deals to a buyer’s market of more deals at reduced valuations, many of the deals will be distressed. For dealmakers who are accustomed to healthy company transactions, distressed investing provides tremendous opportunity, but also tremendous challenge. 

Distressed investing is to healthy company investing as sprinting is to marathoning. Though they are both running races, they have very distinct and non-transferrable characteristics and requirements to compete effectively. Just as a marathoner is not likely to do well in a sprint without significant preparation and support, a healthy company investor diving head-first into the distressed M&A market is likely to find themselves struggling to keep up and without adequate risk mitigation. But those who can adapt quickly to this new normal will have opportunities for significant returns.

HEALTHY VS. DISTRESSED M&A

The key difference between healthy and distressed M&A is the pace and the order involved in a transaction. Distressed company transactions typically take place under significant time pressure, often without good data on problems or solutions, all as cash runs low and stakeholder emotions run high. 

Investors in healthy deals can proceed at a pace that works for them to get comfortable (or not) with data available from past consistent performance; distressed deals require investors who can handle difficult timeframes without historical information bearing any resemblance to present circumstances. Healthy deals often involve a growth thesis; distressed deals require a survival strategy. Healthy deals are often properly or under-levered, leaving room for leverage to make a positive difference; distressed deals are often over-levered with no room to maneuver, requiring alterative structures and solutions.  

A particular challenge we expect to see in post-pandemic deals is that distressed deals usually lack both the information needed for good diligence and a comparative historical basis for comparison, planning, and, as a result, challenges regarding valuation. Consider: 

• What is normal for demand/revenue? 
• Is supply/COGS solid? 
• How do you answer these questions for businesses that were healthy pre-pandemic and are now shut down? Was the demand disruption mandated and temporary? Was it mandated but likely to have permanent effects? And how do you model and value the go-forward opportunity?

Lastly, above all else, the hallmark of distressed deals is that liquidity challenges and lack of cash runway further complicate the ability to get from start to a closed transaction in the available timeframe, even if there are interested and capable parties.  

WAYS TO MAXIMIZE VALUE AND MINIMIZE RISK WITH DISTRESSED OPPORTUNITIES

A useful tool for distressed transaction opportunities is the same framework we use when advising distressed companies: the 3C’s. The 3C’s help address the frantic activity that leads nowhere or the paralysis that strikes many executives facing distress by helping key players narrow their field of focus to three critical drivers: Cash, Communication, and Control.

1. Cash: How much is there, and how long will it last?

The single most important component to succeeding in a distressed transaction is understanding a company’s cash situation, either working within the existing parameters or being able to increase runway. The 13-week rolling cash flow model – ideally an integrated P&L, Cash Flow, Balance Sheet, and Borrowing Base – is the most common tool for this analysis (not a monthly projection). In truly dire cases, we have even used a daily cash flow model. The goal is to understand the timing between expected inflows (receipts) and expected outflows (disbursements) and to manage in such a way that the company does not run out of cash mid-diligence. 

Usually, an unrelenting focus on cash means that you must move at lightning speed, be creative with how to improve liquidity, have a Plan A, B, and C, and be willing to contribute cash if you really want the deal. (The concept of propping up a company with pre-purchase cash is an anathema to many healthy company acquirers, but it is commonplace in the distressed M&A world, to get the company to a transaction close and give you the best chance for success post-sale.)

There are a number of potential ways to increase cash in today’s COVID-19 environment: stimulus aid, financing, incentives for faster collections, landlord and vendor management, monetization of non-core assets, operational improvements, and insurance or other claims. In a cash-constrained environment, cash, not profit, matters in the short term.

2. Communication: Talk frequently and transparently to all stakeholders

As the prospective buyer, the more you get to know the stakeholders and the more they come to see that you want to save their company, not ruin their recovery, the more you will gain goodwill points that go a long way toward a cooperative effort by everyone to produce realistic information quickly and drive toward a successful sale. Stakeholders can include owners, management, employees, lenders, landlords, trade vendors, customers, and regulators.

Additionally, if you think any of the existing management team could be part of the go-forward team post-sale, frequent interaction gives you a very good window into their contribution and skill level. In fact, in a distressed transaction, it is not uncommon for the management team and prospective buyer to form a unit even before the sale as a result of a collaborative, in-the-trenches approach to getting the company from here to there. This is quite different from the more arms-length approach often seen in healthy company acquisitions.

3. Control: Assessing EBITDAC and bridging to future performance

Control takes many different forms, but generally focuses on understanding what makes the business tick, projecting how it will tick going forward, and knowing and tightly monitoring key performance indicators (KPIs) to ensure that the bridge from past performance to future plan is on track and achieved. 

This bridge from past to present to future is such a challenge in today’s environment that a new tool for investment analysis has been rapidly deployed – EBITDAC, or “earnings before interest, taxes, depreciation, amortization and COVID-19.” 

To understand the viability of a distressed company in a post-COVID-19 world, you will need to be able to assess the company’s past performance and likely future performance by understanding:

• Was the business already stressed or distressed pre-COVID-19? 
• If pre-COVID-19 fundamentals were strong, can the company survive through restart and beyond?
• Does the existing business model fit with (or is it easily adapted to) expected post-pandemic consumer behaviors? 
• Was the demand disruption from COVID-19 likely to be temporary or permanent? If permanent, what percentage of previous demand will be the expected new normal post-restart?
• If demand is holding (or expected to return), is supply available and reliable?
• Can the business make money going forward, and if changes are required to answer “yes,” are the changes likely? This is especially important for distressed companies, as they tend to be inefficient, not well-automated, and not properly focused on value drivers, i.e., what is making money and what is not.  
• Where are the skeletons? For distressed companies, it’s important to understand at the outset the extent of contingent or unrecorded liabilities as well as risks created from lack of liquidity, angry stakeholders, etc. 

Asking the right questions is the first critical step to generating a positive post-transaction ROI. Good analysis of the information provided is next. 

To calculate EBITDAC in a distressed environment, financial disclosures must be complete, accurate, and fast, and those who review them need to act quickly to focus on key value drivers. It’s important to analyze at least 2-3 full years and perform a thorough trailing 12-month analysis, as well as a forward look by month for the next 9-12 months. You might also consider data analytics tools that dig deeper into sales transactions at the customer and product levels to better understand the company’s sales performance and customer buying patterns. 

This analysis needs to sort out the “real businesses” from the “one-hit wonders” that may be succeeding among the conditions of COVID-19 but have been masking red flags in business performance even before COVID-19 disrupted the economy. Potential red flags in top-line performance include: 

• A decline in average selling prices or increased promotions that may be contributing to higher sales, but ultimately will result in lower profitability.
• Increased selling prices that lead to overall higher revenues, but may hide the fact that customers are actually buying lower volumes. 
• Inventory channel stuffing due to customer over-buying and not having insights into true demand levels on the shelf

Slicing and dicing revenues by doing a price/volume analysis as part of the financial due diligence is critical to uncovering these key trends.

CAN THE BUSINESS ADAPT QUICKLY ENOUGH TO SURVIVE? 

Distress creates the opportunity for an investor to “get it right” as the business emerges from its immediate crisis. Once you’ve developed a deep understanding of how the business got to its current condition, you’re in position to identify what can be changed to improve performance going forward. The immediate to-do list should include an analysis of the company’s structure, customer base, pricing, days sales outstanding (DSO), workforce, capital structure, historical liabilities, vendor contracts, days payable outstanding (DPO), and shedding of non-core/non-money-making assets, units, and locations. While predictions are difficult today, business fundamentals remain. More money has to come in than goes out; it is typical that 20% of the revenue results in 80% of the profit; and bet on good management every time.

When it comes to analyzing the ability of a distressed business to survive and eventually thrive in the long term, investors typically look backward by challenging every line on the balance sheet and the income statement, and look forward based on economic and consumer-trend forecasts. COVID-19 has injected a new level of uncertainty because no one has a clear picture of how consumers will behave once mandates are lifted and a reliable forecast is available. The long-term viability assessment now needs to challenge every assumption about consumer behaviors in the same way that the historic analysis has always challenged every line item in the financials. Will customers return to stores and restaurants, or will the COVID-19-driven migration to online sales permanently change the retail landscape? Will people return to airplanes, hotels, and face-to-face interactions, or have they become so accustomed to virtual interactions that those sectors will never return to pre-2020 levels?

And demand isn’t the only uncertainty: Assumptions around supply must be questioned as well, as you’re dealing not with just one faltering business, but with entire industries that are faltering. Look at the entire supply chain, from parts to facilities to distribution, and factor in where supplies are coming from – are they being produced somewhere overseas, where production could be shut down even as the U.S. opens again?

Investors and business managers who get the answers to questions like these right will be the ones who are positioned to succeed in the years ahead. 

A LAST THOUGHT ON URGENCY…

While we’ve focused this article on distressed transactions, it’s worth noting that every transaction in the time ahead will have a higher level of stress than normal. If you’ve previously worked on healthy transactions, the impact of COVID-19 is going to inject new stress that wasn’t there before; a lot of companies are going to have some form of distress. And if you’ve thrived in the distressed sales market until now, COVID-19 will be increasing its intensity. 
Dealmakers need to be prepared to act even more quickly than in the past, as the timetables and deadlines that companies are facing in this historic downturn are unlike any seen before. Your transaction team needs to include advisors who understand the nature of distressed transactions, who can act quickly and decisively to collect and analyze relevant information, and who can adjust nimbly to circumstances that change from hour to hour. While a healthy deal may take months, with gradual provision of complete, tidy financials and negotiation, a distressed one may include incomplete, incorrect, or otherwise imperfect information, laid out quickly as cash runs out, as the business tries to remain operating while managing creditors, lenders, staff, and publicity. 

The pandemic has shifted what had been a frothy seller’s market into a higher-risk landscape of businesses desperately in need of capital. Those dealmakers who possess the market intelligence and technical know-how to navigate through and beyond today’s marketplace will be in the best position to navigate the years ahead.