M&A Roars Back After a Brief Pause in 2020, but the Emphasis Shifts to Longer-term Resilience and Value Creation
ALM Intelligence Pacesetter Research finds clients are increasingly rewarding professional services providers best able to help them transcend the M&A transaction event and achieve long term value
New York, NY – March 30, 2021– New analysis from the ALM Intelligence Pacesetter Research team has found that after a brief pause in the spring of 2020 because of COVID-19, M&A markets have roared back to life. Many professional services providers focused on M&A report that their pipelines are as full as they’ve ever been. However, a significant shift has taken place due to record-high valuations and increasing government scrutiny of deals clients are being driven to focus on their assets’ longer-term performance.
“In recent years, the emphasis in deals moved from getting across the day one finish line to the successful implementation of the thesis strategy. The way clients view the value of deals has lengthened, so they are now looking not just at the value realization on day two, but in six months or a year, five years, and beyond”, said ALM Intelligence Pacesetter Research Analyst Lead Tomek Jankowski. “The reality is that the full value of a deal now means developing a strategy for asset performance over the acquired asset’s lifecycle. This change is putting M&A back into its broader corporate development context and is becoming a key competency for clients to build internally for their long-term value creation strategy. This evolution adds up to a very different engagement model for providers in this space.”
In ALM Intelligence Pacesetter Research: M&A Services 2021-2022, the Pacesetter Advisory Council assesses the strategies and service offerings of twenty-one providers identified as Market Leaders for their ability to deliver client impact in today’s challenging M&A environment. Additionally, the research and analysis provide insights into the competitive dynamics and service delivery trends, driving convergence across financial advisors, insurance, legal, management consulting, and multiservice firms.
Research Highlights:
- Markets remain flush with dry powder and cheap credit and will likely continue for the next several years
- Valuations are sky-high, but the quality of assets is an important variable, prompting comprehensive and intense inspections of the due diligence process. The resulting scrutiny is facilitating increased efforts at utilizing robotic process automation (RPA) and AI in the deal process
- Increased competition for assets, coupled with growing government antitrust scrutiny in deals, has led to compressed deal timelines. These compacted windows translate to intense pressures for accelerated deal deadlines, reinforcing trends towards significant roles for advanced technologies in transactions while materially shifting the role and risk providers assume in deals
- There was a clear separation between the approaches of those professional services providers which focus on the deal process and those which focus on longer-term outcomes and relationships
- By most accounts, failure rates in deals (meaning the transaction fails to achieve its stated thesis value or even ends up destroying value) remain north of 50%. Providers are finding enhanced deal chances with clients who build experience internally managing structural change — while conversely, the deals at greatest risk are one-off events involving inexperienced parties
- To counter these failure rate trends, some clients (especially, but not exclusively private equity firms) have been developing in-house M&A and change management capabilities, less to supplant external providers than to have greater control over deal strategy and process, using external providers to fill capability gaps
ALM Intelligence evaluates providers’ abilities to bring the full advantage of their extended organization, innovation capability, service delivery model, client enablement capabilities, and brand eminence to create impact and value for clients. ALM Intelligence evaluated the M&A capabilities of the following providers: Alvarez & Marsal, Ankura, Bain & Company, Boston Consulting Group, Chubb, Crowe, Deloitte, EY, FTI Consulting, Goldman Sachs, Goodwin Procter, JP Morgan, KPMG, LEK, Lockton, McKinsey, Mercer, North Highland; Osler, Hoskin & Harcourt; PwC, and West Monroe Partners.
ALM Intelligence Pacesetter Research provides independent, objective research to providers and buyers of professional services, coupled with practical insights that inform the decision-making process for strategic planning and procurement professionals. For more information or to obtain the full versions of the ALM Intelligence Pacesetter Research series, visit: https://www.alm.com/intelligence/pacesetter-research/ or contact our Strategic Accounts Manager, James Doyle at [email protected].
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