It was market carnage, the largest one-day drop of the Dow Jones Industrial Average in economic history. In a single day, almost 23 per cent of the value of the American stock market was wiped out with repercussions that saw $1.7 trillion knocked off stock markets around the world. It was a time of panic, despair and uncertainty, when everything only seemed to go downward.

It was October 19, 1987, and it quickly became known as Black Monday. Even now, 33 years later, Liam Booth can still recall the day vividly.

Liam Booth was only in his second year as a corporate finance executive at the time. He’d landed the job, as a fledgling chartered accountant, after managing to impress Dermot Desmond and Michael Walsh in an interview for a junior role at the pioneering stockbroking firm NCB.

Now, he was in the eye of a storm.

“For a rather naive young fella at the time it just seemed like the world was ending but it didn’t,” Booth says. “Dermot didn’t flinch. He looked to see where in the crisis would opportunity present itself.”

“Crises pass. This will be the case this time too. It is a question of what can you do now to best get through it from a business point of view.”

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“I personally feel less scared this time around”

Thirty-three years later, NCB, is now Investec after the South African headquartered business bought the firm for €32 million in 2012.

Liam Booth, meanwhile, has been managing director of Investec’s corporate finance team since 2003.

He has diverse experience from spells in senior roles with Goodbody Stockbrokers and Key Capital to gaining hands-on business experience as finance director with Datalex. He also has boardroom nous as a 17-year non-executive director of listed shipping and transport company Irish Continental Group, as well as experience in venture capital as a member of the investment committee of Investec’s venture capital arm. 

Investec’s roots in NCB give it local Irish knowledge, and the parent gives the Irish division an international range through its eight offices around the world.

Booth is in his study when we talk. He has been ensconced there since March 27, when most of Investec’s business moved out of its base on Harcourt Street, Dublin 2, to their homes after the state called for social distancing.

“There is a new rhythm of working from home,” Booth admits. “But it is working for all of us.”

During the last financial crisis from 2008 on, Booth was at the coalface advising businesses on how to first survive, and then recover. The Covid-19 crisis is different, as it threatens health as well as finance.

I ask Booth how this crisis compares to the last one from a business point of view. “I personally feel less scared this time around,” Booth said. “In 2008, it just seemed like the world was on the brink of financial failure.”

“It may take months but there will eventually be drug therapies as well as vaccines to get us through this crisis.

“When you think about 2008, we seemed to be in a perpetual state of crisis going back to Bear Stearns in March ‘08 and then Lehman’s hits six months later and then two and a half years later you have the nationalisation of the Irish banks.

“It just seemed at the time to be lurching from crisis to crisis and from one issue to another. This time was much more abrupt in terms of the impact on business. Businesses are seeing literally a cliff edge of revenues where they are either falling dramatically or coming to a complete shuddering halt. You can’t underestimate the impact of that.”

Booth cited a recent study from Brewin Dolphin, which bought Investec’s wealth management business for €44 million last November, as one cause of cautious optimism.

He said this showed that in 2008 it took 80 weeks after the crisis first hit for the United States to decide to put hundreds of billions into the economy to stimulate it again.

“The response from governments this time is so far faster so lessons have been learned,” he said. “You have got to hope that this helps sustain businesses long enough to get through what we hope is a period of months rather than a more prolonged crisis.”

“There is an immediate liquidity crunch which governments really need to help with and focus.”

In the 2008 financial crisis, Booth said Ireland had many good businesses which found themselves with the wrong balance sheets. “They were generating revenues and profits, but they had debts that they couldn’t support.”

He recalls last time around working with businesses like Arnotts, the department store, Topaz, a petrol station group, BWG, the groceries chain, and banks like the EBS to restructure their balance sheets and allow them to carry on, sometimes with new owners.

“Now the issue is more sudden and abrupt. It is hitting the P&L immediately as revenues are falling away,” Booth said. “Companies inevitably can’t adjust their cost base as quickly as revenues are falling so it is hitting profits and cash flow in the near term.”

“There is an immediate liquidity crunch which governments really need to help with and focus.”

He said companies were responding by trying to preserve cash and cut costs by doing things like temporary layoffs. 

“From a funding point of view many are looking at their creditors and saying let’s hold off on paying people,” Booth added. Every time this happened, he said, this impacted another business – “Company’s working capital requirements are ballooning out.”

Banks, according to Booth, were stepping in and offering more liquidity to their corporate customers.

“Our corporate clients are in battening down the hatch mode and trying to make sure they have businesses that can remain resilient.”

“But there are limits to how long that can be sustained so some other wider solutions are going to have to be brought to bear for business,” he said. That is the real challenge.”

Private equity, he said, was focused in general on supporting existing investments but not yet ready to invest in new ones. “I think in due course private equity will be willing to step in and provide funding. But they will obviously be looking to do that where they can get a return. But we are not into that phase of the crisis right now.

“Our corporate clients are in battening down the hatch mode and trying to make sure they have businesses that can remain resilient.”

“Some businesses will have to think outside the box in this crisis. Is there a strategic investor?”

Liam Booth said two examples from the last crisis provided some lessons for this one. BWG Group, the operator of the Spar and Mace retail brands, wiped more than €70 million from its debts in 2014 by buying back loans at a discount from Ulster Bank and Lloyds, using fresh investment from a listed South African group called Spar South Africa.

It also obtained cash in the tank to grow, which not much was in supply.

“BWG had an overly leveraged balance sheet going into the crisis so we worked with Leo Crawford [BWG chief executive] and the team with their syndicate of banks on a restructuring of their debt.”

This was important not just for BWG’s management. It had a network of more than 900 stores in Ireland and about 280 in Britain, making it an important employer in cities, towns and villages.

“We helped them put together that deal. Spar South Africa came in as a strategic investor which underpinned the restructuring of the business and ensured that BWG was a stable platform. The business hasn’t looked back since then.

“Some businesses will have to think outside the box in this crisis. Is there a strategic investor? Private equity could have a role to play but maybe equity could be found from other sources.  People talk about M&A and inevitably it is the acquisition activity that happens. In a time of crisis good old-fashioned merger activity can make a comeback.”

Investec, he said, had in the last crisis advised Capvest on what became Valeo Foods, which now has sales of more than €1 billion.

Valeo saw the merger of the food distribution business of Origin Enterprises and Batchelors in 2010, before in 2011 adding Jacob Fruitfield. The move brought brands like Roma, Erin, Odlums, Shamrock, Jacob’s biscuits and Silvermints together.

“What persuaded all of the parties was they could see the clear synergies that could be obtained by combining the businesses. Capvest came in as the private equity investor to provide the capital to allow some shareholders to exit or partially exit and provide capital for the expansion of the business.”

“Out of a crisis does come opportunity and you will see some of that sort of merger type of activity taking place in the times ahead.”

This time around, Brexit was another factor to be considered which could when combined with a Covid-19 cash squeeze cause some British companies to sell Irish assets.

“Large corporates, as part of their own survival and restructuring plans, will be looking at whether there are businesses that they are less attached to.” This represented, he said, a chance to buy for Irish companies.

“It is a question of getting on top of the situation. Trying to identify and assess the full impact of the crisis and what are the menu of options available.

“This crisis is first and foremost all about cash and liquidity,” Booth said. “It is about doing detailed planning about what your revenue and cost profile is going to look like on a week by week basis for the next six months and then on a month by month basis after that.”

“Ultimately it is about working out what your funding requirement is as a business,” Booth said. “Then it is about engaging early with your financial stakeholders be it the banks and shareholders. Our experience is that open and early engagement is always best.”

Selecting a good advisor, he said, allowed businesses to anticipate what information their banks and shareholders might require as well as work out what actions were needed to survive the crisis.

“Is there debt capacity that you look at taking on? What equity funding could be out there? Is there a strategic investor worth talking to? Is there a business or assets we should be thinking of disposing?”

“It is a question of getting on top of the situation. Trying to identify and assess the full impact of the crisis and what are the menu of options available. You can’t do that exercise soon enough.”

“Those with access to capital and stronger balance sheets could do well.”

Liam Booth and his team are now all working remotely. About four weeks ago he said they had nine M&A and fundraising activities on their books at various stages.

“Five of those are on hold. Four are continuing,” he said. “We are rededicating resources to look at how we can help our clients to address the challenges of the crisis. As we did in the last crisis that will inevitably mean us doing more debt advisory and fundraising work.

“But there are some businesses that are remarkably resilient and are keeping transactions going. The pace may be a little slower, but we are moving forward.”

Some PLCs, he said, were considering tapping the market in new fundraising especially in London. “If you look at the hotel sector I think the bigger hotels groups will see this as an opportunity to acquire real estate at a knock down price in locations they would not have been able to contemplate a couple of months ago.”

“Those with access to capital and stronger balance sheets could do well,” he said.

With the public markets down 30 per cent, this inevitably impacted pricing of private businesses. “Good businesses can pick the moment when they want to sell and don’t have to lock into a 30 per cent discount. But more generally this crisis is going to lead to more cautious valuations.

“It is also going to lean towards transactions that have less leverage,” he said. “Banks will inevitably be more conservative.”

“But within the financial services sector, I think some of the non-bank lenders is an area where you could see some consolidation.”

The stock-market was another source of activity.

“There are certainly a lot of public companies in the UK contemplating fundraising and tapping the market and there does seem to be a willingness by institutions to back that.

“You will see businesses look to bolster their balance sheets in challenged sectors and then try to emerge as a consolidator.”

“Hopefully we don’t see this deteriorate to a financial crisis in our banks,” he said.

“But within the financial services sector, I think some of the non-bank lenders is an area where you could see some consolidation.

“They probably have a bit more weighting towards leisure and consumer sectors that are most impacted. We expect you could see consolidation there. Scale in financial services is needed these days from a capital and compliance point of view. This crisis could lead to an uptick in that area.”

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Every week Liam Booth dials into a weekly call with his corporate finance counterparts in Investec offices around the world.

This gives him a good view of how Covid-19 is wreaking economic devastation around the world, as well as how some earlier hit markets are now beginning to recover.

“In our Hong Kong office they have a Chinese client who has a potential interest in an Irish company. We are looking to pursue that with them,” he said.

“Through the network we also identified a large investment group in the Middle East who have a particular interest in investing in European food companies. We have had a dialogue with them around a couple of Irish opportunities.

“It is one of the things we think that is very important during this crisis is you use the networks that you have available. Now isn’t the time to be getting into your bunker, it is the time to get out there.”

As with previous crises, it is not game over by any means.