Notwithstanding a degree of macro-market uncertainty, we are experiencing high levels of deal volumes at present. The 'wall of money', which has been documented elsewhere from well invested UK corporates, private equity and institutional fund sources, continues to chase investment opportunities.
With the benefit of post-referendum foreign exchange rates we are also seeing unprecedented overseas corporate and investor appetite. These factors might tend to drive a 'diligence-light' approach, however our experience is quite the opposite. Investors remain wary and 'caveat emptor' is still the mantra that the vast majority of clients are driven by. What we are finding is that a dichotomy exists between the desire to deploy funds quickly and succeed in competitive auctions, and to analyse, interpret and understand the vast quantities of data that businesses now generate.
We reflect on how the approach to due diligence on an M&A transaction is reacting to this:
- Deal teams focus on key deal hypotheses, stepping away from a standard scope of work and going beyond standard management reporting.
- Access to ‘big data’ is allowing deal teams to get underneath reported management information to understand drivers of target business performance. We are seeing the use of technologies such as Alteryx, SQL and Python to structure and analyse financial performance.
- Due diligence reporting is moving away from static deliverables and becoming increasingly fluid.
- Interactive hosted dashboards to allow deal teams to learn and share financial analysis in real time and drill down into financial analysis collaboratively. We are seeing the use of Tableau, Qliksense and Power BI as tools to allow the presentation of diligence outputs.
- Shifting focus from last 3 years / next 3 years to a longer term view of the target performance 'through the cycle' and consideration of external drivers and benchmarks.
- Use of technology allows Due Diligence teams to analyse a greater amount of data than historically possible. Linking performance to trends in external indices, e.g. oil price, currency, GDP, is increasingly being used to support financial analysis, together with the use of anonymised benchmark data to assess relative performance.
- Competitive M&A processes require slick deal execution supported by end-to-end M&A solutions which provide deep financial and commercial insight.
- Our role as due diligence practitioners is to integrate our work into that of the deal team in order to add value throughout the deal process.
- We have developed iDeal which is our proprietary M&A analytics tool for analysis of financial information presentation of interactive M&A dashboards. Watch a short video to learn more.
Matt leads the Transaction Services team in Yorkshire and North East, based in the Leeds office. Matt is the UK TS Innovation lead partner and prior to that was the UK firm’s lead partner on the global development of iDeal.
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