NEW YORK — Less than two months ago, Rick Gould, one of the PR industry’s busiest M&A advisors, was flush with business, actively working with nine agencies wanting to sell their firms and two looking for acquisitions.

While two firms did sell (they were too far along in the process to halt the deals), the owners of the seven other firms are, for the time being, not making any moves. The two seeking acquisitions are also laying low — at least until we have a better idea of how badly the Covid-19 pandemic is going to hurt the PR industry, let alone know when it will be fully back in business.

“I believe Q2, April through June, will be a bloodbath — more lost clients, more staff cuts, more uncertainty with help from the feds, no matter what they promise and (how they) spin the messaging,” said Gould, whose firm, Gould+Partners, specializes in the mergers and acquisitions of PR firms. He has been advising agencies hit hard by the pandemic to focus now on rebuilding their companies, so that they are attractive to buyers when the market improves.

“No one should sell their firm on a fire sale,” Gould said.

All of which is as far from where we expected M&A activity to be now, given the volume of deals made in 2019 and the early part of this year.

According to Davis & Gilbert’s 2019 public relations industry M&A report, M&A business was booming last year, with more transactions completed than during either of the previous two years. Last year, the industry saw 72 completed transactions by 58 buyers, which is more purchasers than ever before. Nineteen transactions had already been completed in 2020 by the first week in March.

Buyer interest in bigger firms was up, with twice as many deals involving the acquisition of agencies with more than $25m in annual revenue than in 2018 or 2017. Independents looking to expand their capabilities fueled much of the activity. So did firms backed by private equity, which doubled their activity in 2019 from the year before, resulting in 11 acquisitions, Davis & Gilbert reports.

Most of which essentially came to a screeching halt with the mid-March widespread shutdown of business, quashing the acquisition aspirations of both sellers and buyers — and leaving little hope for even a slow restart to M&A until the third quarter of the year (although some experts see even that as wishful thinking).

“This has hit out of the blue and has been pretty devastating,” said Prosper Group managing partner Alex Halbur, who said he doesn’t expect activity restarting until we have more information — about the trajectory of the pandemic, the end of the shutdown and how badly the economy is going to be reeling (and for how long) when the world does get back to business.

“People buy based on opportunity and perception of success, and it’s a lot easier to picture success in a great economy than a bad economy,” Halbur said. “Until there’s a light at the end of the tunnel and the country has a date where we think things (will reopen) deals will be suspended.”

Halbur speaks from experience, having been in the midst of late-stage M&A dealings for clients when the shutdown took effect — which have since stopped. The interest of European holding companies in buying American independents, a budding phenomena earlier this year, has basically dried up. “When you can’t travel, you don’t buy an agency,” he said.

Nor do you want to sell an agency in tough times like these, during which “value buyers” (who want to make acquisitions for less than the going rate) look for deals with “panic sellers” (distressed agency owners too scared to wait it out), usually to the financial detriment of the latter.

“My advice has been for firms in this position not to sell now (but wait to) build up their firms once the economy rebounds and their business is flourishing as it was six weeks ago,” said Gould.

Halbur agrees, saying the small independents that are currently taking the biggest economic blows could wind up under even greater financial duress if they sell too low. “The normal independent firm with six or seven million in revenue can’t really afford to make a mistake in M&A,” he said.

Yet Jack Bergen, an M&A consultant after a long career as an in-house and agency senior leader, sees some opportunity in M&A for small, distressed agencies, should they decide to become part of a larger organization and get the benefits, from cash to support, that come with it.

“I think what we’re going to see is small firms that are going to be looking for a safe harbor after what they’ve been through,” Bergen said.

While Bergen said he doesn’t see any big acquisitions in the near future, he is expecting there to be deals that involve small independents with attractive client rosters getting snatched up by larger independents that provide them a base.

At this point, of course, when (or if) any of this could actually start to happen is anyone’s guess, as — two months in — much of business is still on lockdown. Even when business does start to reopen, the pace and economic recovery is expected to be slow.

Yet, Gould said he is “bullish” on prospects for buyers and sellers of agencies returning nonetheless, forecasting an uptick in M&A activity during the last quarter of this year and 2021 being a full year of recovery.

“We have weathered hurricanes, tornadoes, wildfires, earthquakes, crash, the 2008 financial crisis and September 11, 2001,” he said. “Although this is a challenge we have never seen in our history, I truly believe both the US economy and the PR industry will bounce back and the M&A marketplace will once again thrive.”