The most recent Transaction Advisors Institute (TAI) M&A conference was held at the University of Chicago in late June and covered topics ranging from current challenges impacting complex transactions to innovative methods to improve deal performance. Corporate development leaders, in-house M&A counsel and private equity investors from a range of industries and regions shared first-hand experiences, best practices and guidance from their vast M&A experience. Midaxo was pleased to showcase its productivity platform for corporate development, which includes purpose-built pipeline management, due diligence and post-merger integration modules.
Below are 7 key takeaways from the panel discussions on the state of M&A and current challenges impacting complex transactions today.
Key M&A Takeaways for Q2 2023
1. M&A is hard
Although this will come as no surprise to most M&A practitioners, participants agreed that M&A is a difficult proposition. One reason is that there are no clear criteria or goals that define success. Revenue synergies are difficult to calculate because they may not materialize, though cost savings are more predictable. Success tends to go hand-in-hand with the business confidence level in the economy. The current high-interest-rate environment is complicating matters by making it more difficult to pencil out debt-driven private equity deals. The high cost of debt is contributing to fewer PE deals. Most panelists agreed: a well-articulated acquisition strategy is essential for long-term success.
2. Speed in closing M&A deals is of the essence
Speed is becoming increasingly important in M&A. Many companies try to separate themselves from the competition by accelerating the time it takes to conduct due diligence and close a deal — under six weeks from LOI to close has become a standard to strive for. 45-60 days has become a common timeframe for completing diligence and closing a deal.
3. Retaining key employees can be crucial following an acquisition
Retention of key employees is important, especially with high-growth tech deals, or the value of the merger can walk out the door. Brain drain can be large after the first 30 days following deal close if a company is not careful.
4. Post-merger integration is critical to success
Post-merger integration is crucial to the success of a deal because this is the stage where value is most often gained or lost. Panelists noted that buying at the right price is important, but you can’t always control that because there is so much unknowable information. What you can control is the PMI process. It is important to task someone skilled and with the right tools to ensure an acquisition is successful through the integration period.
5. Use AI with caution in the M&A process
AI can be a powerful tool for reviewing contracts and other tasks, but participants agreed the rapidly evolving technology should be used with a fair amount of skepticism. AI could be especially useful in forecasting consumer demand for a product or service. On the other hand, a highly paid general counsel who relies exclusively on AI to do their job should probably start looking for another job.
6. Post-mortems are important to improving future M&A outcomes
Conducting post-mortems is essential in order to learn from past mistakes and improve performance over time. Serial acquirers tend to develop good muscle memory for M&A because they generally conduct post-mortems and apply lessons from past experiences to upcoming deals.
7. Business leaders are key to targeting
In-house business leaders generally drive the identification of possible new targets because they are most familiar with the composition of their markets. Bankers, on the other hand, are not necessarily the best source of targets. Although they occasionally identify new opportunities, they tend to bring targets that are already in buyers’ sights. One panelist noted their team uses bankers for relationships with companies they have been targeting and bankers sometimes find targets “between the rocks” — but most of their targets are found in-house.
For more key takeaways from industry experts, read our recap of the Spring 2023 TAI M&A conference. We look forward to partnering with TAI once again this coming September in New York City. If you would like to learn more about how M&A SaaS platforms are helping companies around the world improve their performance, please contact us.