Update on M&A deals

At our Forum session on Global Trends in M&A last week we were surprised to hear from attendees just how busy they are on deal flow this year.

The M&A market is hot despite everything going on around us. Both Corporate and Private Equity transactions are up and we took a look at the recent Deloitte survey to help us lawyers gain a perspective on just whats going on:

Deloitte’s 2022 Future of M&A Trends Survey polled 1,300 executives at corporations and private equity investor (PEI) firms from August 26 through September 7, 2021 to glean insights about current deal activity and expectations for the next 12 months.

Key findings

Merger, acquisition, and divestiture activity

There is more to today’s M&A activity than just acquisitions. Divestitures are also on the rise, and more executives report they are open to alternative strategies.

  • 92% of respondents expect deal volume to increase or stay the same over the next 12 months.
  • 57% of corporate respondents have engaged in a divestiture in the past 12 months.
  • 32% of corporate respondents say they are considering a divestiture.

Challenges and solutions keep evolving

Corporate strategy, M&A strategy, and operating model limitations are continuing to intersect in different ways. Executives say aligning these forces into a coherent approach remains one of their greatest challenges. But there are new tools to help: digitally enabled, virtual, and hybrid management of the M&A process is more prevalent than before. So is interest in international deal-making.

  • 54% of responding dealmakers think the tightening regulatory environment will spur more deal activity, as they race to beat implementation of more challenging obstacles.
  • 68% say they are taking a greater interest in international deal-making over the coming year.

Transformation and restructuring

Companies are aiming for more transformational change and many are focused on achieving that transformation during the transaction.

  • More than half (53%) of the companies surveyed have restructured (including changes to working capital, reorganization, cost reduction, and legal entity restructuring) since the beginning of the pandemic.
  • 44% say they are considering restructuring over the next 12 months.
  • The most common reasons for restructuring were digital transformation, process simplification, and automation. Nearly two-thirds (63%) of respondents report that the success of their M&A activity is moderately or highly dependent on a successful transformation.
  • 34% of surveyed companies say they are implementing transformational restructuring while their deals are underway.

M&A looks to the future

As deal activity and volume stay robust, dealmakers continue to embrace new ways to get the work done. Data and analytics capabilities continue to make inroads into processes like diligence and monitoring.

  • 69% of respondents report they are using data analytics in their diligence and monitoring right now.
  • 27% are considering adding those capabilities.

Digital tools and virtual settings are gaining prominence in M&A deals, with mutually reinforcing effects that have the potential to speed up and alter the process.

Playing both sides of the ball

Depending upon the pressure they are under and the amount of room they have to act, many companies are approaching M&A strategy through the lens of offensive and defensive strategies. Evaluating moves this way can help determine whether a company needs to protect the position it has, seek gains, or aim for transformative progress. This year, respondents indicated their organizations are moving to put in place more offensive strategies.

“The trends we are seeing in this very active market indicate that we are just at the start of the next M&A run.” –Trevear Thomas, US leader for Mergers, Acquisitions, & Restructuring Services,
Deloitte Consulting LLP

With this valuable insight for lawyers we know that we are entering a new age of transactional activity- and one we need to be better prepared for. The aim of this Forum at Platforum 9 is to provide our members with a place of open dialogue on what they are seeing in terms of new approaches and standards, new terms, new documentation issues and regulatory impact.

Join us next week for our Session on Valuations

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