Latest / Best of LinkedIn: Strategy, M&A & Investments / Best of LinkedIn: M&A Insights CW 43/ 44

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Best of LinkedIn: M&A Insights CW 43/ 44 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 1: We
• 0:00
  Speaker 0: are diving deep into the strategic movements shaping M&A right now, drawing exclusively from the most relevant posts on LinkedIn during calendar weeks forty-three and forty-four.
• 0:09
  Speaker 0: This comprehensive analysis is provided by Thomas Allgaier and Frennis, a BW market research firm specializing in supporting M&A consultancies with critical market and competition perspective for things like commercial due diligence.
• 0:23
  Speaker 0: Welcome to the deep dive.
• 0:25
  Speaker 0: Our mission today is pretty simple.
• 0:27
  Speaker 0: Cut through all the noise online.
• 0:29
  Speaker 0: you know, and really deliver the strategic nuggets that genuinely shifted deal execution these past few weeks.
• 0:34
  Speaker 0: Yeah,
• 0:34
  Speaker 1: exactly.
• 0:35
  Speaker 0: We're looking at where the money's going, what deal structures are actually working, and maybe why so many deals seem to run into trouble after closing.
• 0:42
  Speaker 1: That's the plan.
• 0:43
  Speaker 1: And rather than just like a dry list of facts, we've clustered the key insights, makes it easier to digest, I think.
• 0:49
  Speaker 0: Good idea.
• 0:50
  Speaker 1: So first, we'll hit market activity where our deal makers putting their chips.
• 0:54
  Speaker 1: And second, got to talk about valuation, that persistent gap, and some really creative structuring we saw.
• 0:58
  Speaker 0: Always a hot topic.
• 1:00
  Speaker 1: Always.
• 1:00
  Speaker 1: And finally, the crucial non-financial stuff.
• 1:04
  Speaker 1: Strategy, people, process readiness.
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  Speaker 1: You know, the things that really decide if a deal succeeds or fails.
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  Speaker 0: Okay, let's jump right into theme.
• 1:13
  Speaker 0: one them.
• 1:13
  Speaker 0: Market activity.
• 1:14
  Speaker 0: If you want to see where things are headed, you watch the big deals, right?
• 1:18
  Speaker 0: What were the standout, strategic moves these weeks?
• 1:21
  Speaker 0: Anything signal a real shift?
• 1:23
  Speaker 1: Well, the night acquisition of experiential supply, that definitely turned heads.
• 1:27
  Speaker 1: Right.
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  Speaker 1: Chris Irwin pointed out the strategic thinking behind it.
• 1:31
  Speaker 1: Night, they manage these huge digital creators, right?
• 1:34
  Speaker 1: Your Mr.
• 1:35
  Speaker 1: Beast types.
• 1:36
  Speaker 1: Right.
• 1:36
  Speaker 1: Experts and viral content.
• 1:38
  Speaker 1: Okay
• 1:38
  Speaker 0: an experiential supply.
• 1:39
  Speaker 1: They're all about live event production.
• 1:41
  Speaker 1: So putting those two together.
• 1:43
  Speaker 0: Okay digital reach meets physical experience.
• 1:46
  Speaker 0: Why is that so powerful
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  Speaker 1: now?
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  Speaker 1: Because audiences are kind of saturated online.
• 1:50
  Speaker 1: They're craving real world, you know offline engagement makes sense.
• 1:54
  Speaker 1: So this merger it creates this full stack thing takes Knights digital mastery and plugs it straight into physical events.
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  Speaker 1: They're targeting that massive like a hundred billion dollar plus creator and events market recognizing that the next big thing is turning digital fans into, well, actual attendees.
• 2:10
  Speaker 1: It's a really smart synergy play.
• 2:11
  Speaker 1: Yeah,
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  Speaker 0: that leap from online buzz to actually getting people to show up, I see it.
• 2:16
  Speaker 0: We also saw some big moves just for scale, didn't we?
• 2:20
  Speaker 0: Particularly in professional service.
• 2:21
  Speaker 0: Oh,
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  Speaker 1: absolutely.
• 2:22
  Speaker 1: The RSM UK and RSM US LOP merger, that's pushing them towards what, five billion dollars combined revenue?
• 2:29
  Speaker 1: Huge
• 2:29
  Speaker 0: number.
• 2:30
  Speaker 1: Yeah.
• 2:31
  Speaker 1: And James Gosling noted, It really highlights the power of the partnership model for scaling globally in that sector, accountancy, consulting.
• 2:39
  Speaker 1: It's a way to get massive growth without, say, bringing in private equity.
• 2:43
  Speaker 0: Interesting contrast.
• 2:44
  Speaker 0: Now, zooming out a bit, the global outlook seems, well, mixed.
• 2:48
  Speaker 0: I read mixed,
• 2:48
  Speaker 1: yeah.
• 2:48
  Speaker 0: You've got the US side, the EY Parthenon deal barometer people like Gregory Docko, Miles Avilevich highlighting it, showing momentum building.
• 2:56
  Speaker 0: They're forecasting deal volumes over a hundred million dollars up like nine percent into twenty twenty five.
• 3:02
  Speaker 0: Sounds pretty optimistic.
• 3:04
  Speaker 1: It does.
• 3:05
  Speaker 1: But then you look across the pond to Europe and it's a totally different story.
• 3:07
  Speaker 1: How so?
• 3:08
  Speaker 1: Kai Hezzelman observed Germany is basically a buyer's market right now.
• 3:11
  Speaker 1: Yeah, valuations are lower, sellers are under pressure, succession issues, needing capital, that kind of thing, which actually creates opportunities for disciplined buyers.
• 3:22
  Speaker 0: People willing to move when others are hesitant.
• 3:25
  Speaker 0: Anticyclical.
• 3:26
  Speaker 1: Exactly.
• 3:27
  Speaker 1: Anticyclical place.
• 3:28
  Speaker 1: So you're seeing this real divergence.
• 3:29
  Speaker 1: Depends heavily on where you are and the local macro pressures.
• 3:33
  Speaker 0: Okay.
• 3:33
  Speaker 0: So within these markets, where are we seeing specific sector activity?
• 3:38
  Speaker 0: Any hot spots?
• 3:39
  Speaker 1: Energy and clean tech are definitely active.
• 3:42
  Speaker 1: You saw a tariff and group quarrying on that wind asset.
• 3:45
  Speaker 1: Cecibert Futor for more, second.
• 3:47
  Speaker 1: Shows continued appetite for infrastructure.
• 3:49
  Speaker 1: Green assets.
• 3:50
  Speaker 0: Still strong demand there.
• 3:51
  Speaker 1: But maybe the most disruptive signal.
• 3:55
  Speaker 1: came from tech, AI specifically.
• 3:57
  Speaker 1: Yeah, this AI started Rogo, they just raised fifty million dollars.
• 4:00
  Speaker 1: Fifty
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  Speaker 0: million?
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  Speaker 0: Wow, what's Rogo doing?
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  Speaker 1: They're building what they call a digital analyst, basically AI to help emanate teams and banks automate processes.
• 4:08
  Speaker 0: Well, of course, with cans of deals.
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  Speaker 1: And this is key, they're focusing on the SME succession market.
• 4:12
  Speaker 1: Ah,
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  Speaker 0: interesting news, why is that worth fifty million?
• 4:15
  Speaker 1: Well, think about it, the SME market, especially succession deals, It's huge, volume-wise, but often really fragmented, complex, high-touch.
• 4:24
  Speaker 0: Right.
• 4:25
  Speaker 0: Lots of manual work.
• 4:26
  Speaker 1: Exactly.
• 4:27
  Speaker 1: So, automating parts of the diligence there, like Kai Hesselman suggested Rogo was doing, tackles that complexity, makes it potentially faster, cheaper to assess those smaller deals, could be a game changer for that segment.
• 4:39
  Speaker 1: And that idea of automating assessment leads us nicely into theme two.
• 4:43
  Speaker 1: We've talked about where deals are happening.
• 4:45
  Speaker 1: Now let's talk about how they're getting priced.
• 4:47
  Speaker 1: Okay.
• 4:48
  Speaker 1: And the big persistent issue, maybe even getting worse, is the valuation gap.
• 4:52
  Speaker 0: Right.
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  Speaker 0: We hear about this constantly.
• 4:54
  Speaker 0: Jeffrey Brewster's research puts some numbers on it.
• 4:56
  Speaker 0: Yeah.
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  Speaker 1: He confirmed gaps of twenty to forty percent are pretty standard now in the middle market.
• 5:01
  Speaker 1: Twenty
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  Speaker 0: to forty percent.
• 5:02
  Speaker 0: That's massive.
• 5:03
  Speaker 0: What's driving that?
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  Speaker 1: Well, Brewster argues the core issue.
• 5:06
  Speaker 1: is buyers sticking rigidly to these standardized EBITDA multiples.
• 5:11
  Speaker 1: You know, one size fits all.
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  Speaker 0: And that misses the unique value.
• 5:14
  Speaker 1: Totally.
• 5:15
  Speaker 1: It fails to capture the real differentiators.
• 5:18
  Speaker 1: Not just, you know, good management.
• 5:20
  Speaker 1: We're talking proprietary systems, maybe a custom built software, really strong recurring revenue streams, intangible assets that are hard to replicate.
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  Speaker 0: Stuff that doesn't fit neatly into a standard formula.
• 5:32
  Speaker 0: Exactly.
• 5:33
  Speaker 1: So the message for say CPAs advising owners, or the owners themselves, is that first fair offer based on comps.
• 5:41
  Speaker 1: It likely leaves a huge chunk of your real value, maybe, twenty-forty percent just sitting there.
• 5:47
  Speaker 1: Uh-huh.
• 5:47
  Speaker 1: Because you haven't properly quantified your secret sauce.
• 5:51
  Speaker 1: Which
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  Speaker 0: makes you question the models themselves, doesn't it?
• 5:53
  Speaker 0: Liz Welfalkendorf had some thoughts on this.
• 5:55
  Speaker 1: She did.
• 5:55
  Speaker 1: A really useful prospectus.
• 5:56
  Speaker 1: She said, look, DCFs, comps, precedent transactions, they're valuable tools great for structured thinking.
• 6:02
  Speaker 1: Yeah.
• 6:02
  Speaker 1: They're just maps.
• 6:03
  Speaker 0: Maps.
• 6:04
  Speaker 1: Yeah, maps of if, then, scenarios.
• 6:05
  Speaker 1: They're not guarantees, not problems.
• 6:07
  Speaker 0: Well, there's any testing.
• 6:08
  Speaker 1: Robustly tested against reality.
• 6:10
  Speaker 1: Like, sellers might understate maintenance capex to make current profits look better, right?
• 6:14
  Speaker 1: Neglecting necessary upkeep.
• 6:16
  Speaker 0: Classic move.
• 6:17
  Speaker 1: Or the big one.
• 6:19
  Speaker 1: Terminal value dominance.
• 6:21
  Speaker 1: For anyone listening who isn't deep in DCF's daily terminal value, is the theoretical value way out into the future.
• 6:28
  Speaker 1: Perpetuity.
• 6:28
  Speaker 0: And it often makes up most of the calculated value.
• 6:30
  Speaker 1: Often, eighty percent or more.
• 6:32
  Speaker 1: So if your guess about long-term growth forever is just slightly off, poof, the whole valuation can fall apart.
• 6:38
  Speaker 1: The sensitivity is huge.
• 6:39
  Speaker 0: That's kind of scary.
• 6:40
  Speaker 0: So because of all this uncertainty in these gaps, are we seeing more creative deal structures to bridge the divide?
• 6:48
  Speaker 1: Absolutely.
• 6:48
  Speaker 1: People are getting really inventive to manage risk.
• 6:51
  Speaker 1: That lemeless clap deal Dirk Sommer wrote about.
• 6:54
  Speaker 1: Okay.
• 6:54
  Speaker 1: Textbook example.
• 6:55
  Speaker 0: Okay, break that one down.
• 6:56
  Speaker 0: What was so clever?
• 6:56
  Speaker 0: Well,
• 6:57
  Speaker 1: it was a twenty-five million dollar total price, but look how they split it.
• 7:00
  Speaker 1: Only five million dollars was actual cash up front.
• 7:02
  Speaker 1: Pretty
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  Speaker 0: low for that size deal.
• 7:04
  Speaker 0: Right.
• 7:04
  Speaker 1: Then five million dollars was a vendor loan, basically, the seller financing part of the deal.
• 7:08
  Speaker 1: Another two million dollars in convertible bonds, which gives the seller potential upside later if things go well.
• 7:14
  Speaker 0: Okay, so spreading the risk and reward.
• 7:16
  Speaker 1: Exactly.
• 7:17
  Speaker 1: But the real, uh, the kicker was the earn out.
• 7:19
  Speaker 1: Fifteen million dollars tied to some seriously aggressive growth targets.
• 7:23
  Speaker 0: Fifteen million.
• 7:24
  Speaker 0: That's more than half the deal value.
• 7:26
  Speaker 0: Yep.
• 7:26
  Speaker 1: Clab had to go from two million dollar ARR to ten million dollar ARR in just three years.
• 7:32
  Speaker 1: Huge pressure on performance post acquisition.
• 7:34
  Speaker 0: Wow.
• 7:35
  Speaker 0: That aligns incentives, but doesn't that kind of structure often lead to arguments later on?
• 7:40
  Speaker 1: It definitely can.
• 7:42
  Speaker 1: It keeps the seller highly motivated, sure.
• 7:44
  Speaker 1: But it also means the buyer takes on much less upfront financial risk.
• 7:48
  Speaker 1: It's a balancing act.
• 7:49
  Speaker 1: Financially smart, but operationally challenging, maybe.
• 7:53
  Speaker 0: And even when sellers think they've locked in a good price, there are other ways value leaks out, right?
• 7:58
  Speaker 0: Adam Johannen mentioned buy-side lawyers getting creative.
• 8:01
  Speaker 1: Oh, yeah.
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  Speaker 1: He pointed out how they strategically redefine upfront cash.
• 8:05
  Speaker 1: They'll push hard for things like indemnification holdbacks or working capital adjustments after the headline price is agreed.
• 8:11
  Speaker 0: Meaning the cash the seller actually gets on day one is less than they thought.
• 8:15
  Speaker 1: Precisely.
• 8:16
  Speaker 1: The seller loses leverage on that final payout amount.
• 8:19
  Speaker 1: The actual realized cash price can end up quite a bit lower than what was initially shaken
• 8:24
  Speaker 0: on.
• 8:24
  Speaker 0: So it really underscores needing sharp advisors on the structuring side, not just the valuation.
• 8:30
  Speaker 1: Absolutely critical to protect that final value for the seller.
• 8:33
  Speaker 0: Okay, let's shift gears to the third theme.
• 8:35
  Speaker 0: Execution.
• 8:37
  Speaker 0: Strategy integration people.
• 8:39
  Speaker 0: This is often where deals unravel, right?
• 8:41
  Speaker 0: The post-closing phase.
• 8:42
  Speaker 0: Yeah,
• 8:42
  Speaker 1: the stats are pretty grim.
• 8:43
  Speaker 1: Peter Zink's feature from M&A Formula highlighted some shocking numbers.
• 8:47
  Speaker 1: What were they?
• 8:48
  Speaker 1: Something like sixty to seventy percent of transactions are ultimately regretted by the acquirer.
• 8:53
  Speaker 0: Regretted
• 8:54
  Speaker 1: ouch.
• 8:55
  Speaker 1: And even worse, maybe up to ninety percent never actually create the expected shareholder value.
• 9:01
  Speaker 1: Makes me wonder why people do M&A if the odds are that bad.
• 9:04
  Speaker 0: Seriously.
• 9:04
  Speaker 0: So what separates the successes from the failures?
• 9:08
  Speaker 0: Luck.
• 9:09
  Speaker 1: Not luck, Courtney Teeter.
• 9:10
  Speaker 1: It hinges on M&A complementarity.
• 9:13
  Speaker 1: But a big reason for failure, interestingly, is often poor measurement, not just bad strategy.
• 9:17
  Speaker 1: Measurement?
• 9:18
  Speaker 0: How so?
• 9:19
  Speaker 1: Alexis Chivalier made a strong case for using economic value-added EVA during post-merger integration.
• 9:24
  Speaker 1: It's about going beyond just looking at profit.
• 9:27
  Speaker 0: Okay, can you give us the quick definition of EVA?
• 9:29
  Speaker 0: What does it track?
• 9:30
  Speaker 1: Sure.
• 9:30
  Speaker 1: Think of it like this.
• 9:32
  Speaker 1: Profit just tells you if you made money.
• 9:35
  Speaker 1: EVA tells you if you made enough money to cover the cost of all the capital you tied up to buy and run that business.
• 9:41
  Speaker 0: So did the deal actually earn its keep financially speaking?
• 9:44
  Speaker 1: Exactly.
• 9:45
  Speaker 1: Did the combined business truly earn its cost of capital?
• 9:48
  Speaker 1: If the answer is no, you might show accounting profit, but you're actually destroying economic value.
• 9:54
  Speaker 1: It's a much more rigorous way to judge real success after the deal.
• 9:58
  Speaker 0: That makes sense.
• 9:59
  Speaker 0: A higher bar.
• 10:00
  Speaker 0: Now, beyond the numbers, the human element is massive, isn't
• 10:03
  Speaker 1: it?
• 10:03
  Speaker 1: Oh, absolutely critical.
• 10:04
  Speaker 1: Paul Joyce emphasized integration leadership quality.
• 10:07
  Speaker 1: He talked about strategic alignment, having credibility across functions, and just disciplined execution.
• 10:12
  Speaker 0: And he called that the pivot point.
• 10:14
  Speaker 1: Yeah, the absolute pivot point between value creation and, well, value destruction.
• 10:19
  Speaker 1: If the leadership team responsible for integration isn't aligned, credible, and focused, the deal just stalls or goes sideways.
• 10:26
  Speaker 1: And that
• 10:26
  Speaker 0: ties into what Dylan Roberts was saying about a People First M&A approach.
• 10:30
  Speaker 1: Precisely.
• 10:31
  Speaker 1: And he stressed, this isn't just, you know, soft HR stuff.
• 10:34
  Speaker 1: It means digging into culture and talent alignment way earlier, like during due diligence.
• 10:39
  Speaker 1: Before you close.
• 10:41
  Speaker 0: Because you're buying people and their ways of working, not just assets on a spreadsheet.
• 10:45
  Speaker 0: Exactly.
• 10:46
  Speaker 1: You need to know if they'll fit with key talent will stay.
• 10:50
  Speaker 1: That has to be part of the assessment from day one.
• 10:52
  Speaker 0: We also need to touch on a common strategic mistake.
• 10:55
  Speaker 0: Just focusing on cost cutting, post deal.
• 10:58
  Speaker 1: Right.
• 10:59
  Speaker 1: Andrew Vonsen made a great point about this.
• 11:01
  Speaker 1: He said, slashing costs only buys you time.
• 11:04
  Speaker 1: It doesn't build long term value on its own.
• 11:06
  Speaker 0: So the savings are good, but temporary.
• 11:09
  Speaker 1: Yeah, you get that initial cash benefit, which is nice.
• 11:12
  Speaker 1: But the real strategic move is to take those savings and reinvest them.
• 11:15
  Speaker 0: Reinvest where?
• 11:16
  Speaker 1: Into transformation.
• 11:18
  Speaker 1: Funding new tech implementation.
• 11:20
  Speaker 1: Maybe hiring better talent needed for the next phase.
• 11:22
  Speaker 1: Pushing into new markets aggressively.
• 11:24
  Speaker 1: Cutting just stabilizes things.
• 11:26
  Speaker 1: Investing is what transforms the business.
• 11:27
  Speaker 0: Okay, good distinction.
• 11:28
  Speaker 0: So wrapping this theme up, let's think about founders who want a successful exit.
• 11:33
  Speaker 0: What's the playbook?
• 11:34
  Speaker 1: Pramod Gosavi's Advice was super clear.
• 11:38
  Speaker 1: Absolute focus.
• 11:39
  Speaker 1: Focus on what?
• 11:40
  Speaker 1: On building a great product, building a great team, and securing a strong market position.
• 11:46
  Speaker 1: Acquirers pay the big premiums for that powerful combination.
• 11:49
  Speaker 1: Great product, strong brand recognition, solid team.
• 11:53
  Speaker 1: Focus relentlessly on those three.
• 11:55
  Speaker 0: And start early.
• 11:56
  Speaker 1: Way early.
• 11:57
  Speaker 1: Luke Pate's old hammered this home.
• 11:59
  Speaker 1: M&A Prep isn't a last minute scramble.
• 12:02
  Speaker 1: It starts six to twenty four months before you even think about selling.
• 12:05
  Speaker 0: Getting your house in order, as they
• 12:06
  Speaker 1: say.
• 12:07
  Speaker 1: Exactly.
• 12:08
  Speaker 1: Clean financials, documented processes, a crystal clear story about where the value comes from.
• 12:12
  Speaker 1: He said, if you can't nail your company's value proposition in like, ninety seconds.
• 12:17
  Speaker 0: You lose credibility.
• 12:18
  Speaker 1: You lose credibility, you lose leverage, and you open yourself up to getting reprised downwards during diligence.
• 12:24
  Speaker 1: Preparation is everything.
• 12:25
  Speaker 0: OK, so this deep dive has really shown, I think, a market facing different pressures, depending on why you look.
• 12:31
  Speaker 0: US optimism versus a buyer's market in Europe.
• 12:33
  Speaker 0: We're seeing smart plays into hybrid models, like that night experiential deal.
• 12:37
  Speaker 0: And valuation remains tough.
• 12:40
  Speaker 0: Pushing creativity in deal structures to bridge that gap.
• 12:43
  Speaker 0: And maybe most importantly, the focus on nonfinancials using metrics like EVA, really prioritizing people and integration leadership.
• 12:51
  Speaker 0: that seems crucial for actual success.
• 12:54
  Speaker 1: Yeah, what really stands out is this intense demand for structure for predictability and what feels like a pretty chaotic market.
• 13:00
  Speaker 1: overall making operational readiness and human factors core to the deal thesis isn't like a nice to have anymore.
• 13:08
  Speaker 1: It seems essential.
• 13:09
  Speaker 1: Which, you know, it raises a really interesting question for you, our listener, to maybe chew on.
• 13:14
  Speaker 1: With AI tools like Rogo starting to automate deal origination and parts of diligence, how is that going to fundamentally change things next cycle?
• 13:22
  Speaker 1: Like, will the speed AI offers start to trump the depth of traditional due diligence?
• 13:26
  Speaker 1: What does that mean for competitive tension?
• 13:28
  Speaker 1: Something to think about.
• 13:29
  Speaker 0: Definitely something to watch.
• 13:30
  Speaker 0: If you enjoyed this deep dive, new episodes drop every two weeks.
• 13:34
  Speaker 0: Also check out our other editions where we focus on private equity, venture capital, and strategy and consulting.
• 13:39
  Speaker 0: Thank you for tuning in and make sure to subscribe for more strategic deep dives.