Latest / Best of LinkedIn: Strategy, M&A & Investments / Best of LinkedIn: M&A Insights CW 47/ 48

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Best of LinkedIn: M&A Insights CW 47/ 48 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 1: Welcome to the deep dive.
• 0:01
  Speaker 1: This is provided by Thomas Allgaier and Frennus based on the most relevant posts on LinkedIn about M&A insights in calendar weeks, forty seven and forty eight.
• 0:09
  Speaker 0: And just so you know, Frennus is a B to B market research company.
• 0:13
  Speaker 0: They do great work supporting M&A consultancies with the market and competition perspective, for example, in commercial due diligence.
• 0:20
  Speaker 1: There are huge help in filtering the noise, which is exactly our mission today.
• 0:24
  Speaker 1: We're here to deliver concrete M&A insights that cut through the hundreds of posts out there, focusing on what really mattered in weeks forty-seven and forty-eight.
• 0:33
  Speaker 0: Exactly.
• 0:34
  Speaker 0: And the big theme, if you're watching the deal flow, is really one of, I'd say,
• 0:40
  Speaker 1: cautious confidence.
• 0:41
  Speaker 0: Deals are getting done, but the market is demanding incredibly rigorous underwriting.
• 0:47
  Speaker 0: The scrutiny is just intense.
• 0:50
  Speaker 1: We're seeing that pressure in specific places.
• 0:51
  Speaker 1: Oh,
• 0:52
  Speaker 0: absolutely.
• 0:52
  Speaker 0: Especially around things like cyber risk, the need for flexible deal structures, and that old challenge of operational integration.
• 1:00
  Speaker 1: So for you listening, whether you're an M&A pro, a private equity investor, or a consultant, we've clustered what we've seen into four big themes.
• 1:08
  Speaker 1: We'll
• 1:09
  Speaker 0: start with the macro market backdrop, then dive into the relentless demand for demerg diligence.
• 1:14
  Speaker 0: Then
• 1:15
  Speaker 1: we'll talk about value creation, the people and process side of things, and we'll finish up with a look at where the momentum is sector by sector.
• 1:23
  Speaker 0: Let's jump in.
• 1:24
  Speaker 0: Starting with that macro environment, because really the cost of capital is still the number one pressure point.
• 1:30
  Speaker 1: It's unavoidable.
• 1:31
  Speaker 0: It is.
• 1:32
  Speaker 0: Mary Joyce published a really clear reminder about the inverse correlation between interest rates and M&A volume.
• 1:38
  Speaker 0: Right,
• 1:38
  Speaker 1: when rates are high.
• 1:39
  Speaker 0: activity gets suppressed.
• 1:41
  Speaker 0: Especially for any deal that relies on leverage, you just can't hide behind financial engineering anymore.
• 1:46
  Speaker 1: Which forces a kind of brutal honesty in the investment thesis, doesn't it?
• 1:49
  Speaker 0: Precisely.
• 1:50
  Speaker 0: You have to show up with a much stronger thesis with really disciplined cash flow math just to get the numbers to pencil out.
• 1:56
  Speaker 1: And that pressure, when it hits the public markets, it creates volatility.
• 2:01
  Speaker 0: Yeah, and volatility means companies need to think about defense.
• 2:05
  Speaker 0: Frank Kula and Catherine Yew were talking about this, the resurgence of hostile M&A activity.
• 2:10
  Speaker 1: So boards need to be ready.
• 2:11
  Speaker 1: They
• 2:12
  Speaker 0: need to be more than ready.
• 2:13
  Speaker 0: Heightened defense readiness, stakeholder coordination.
• 2:17
  Speaker 0: It can't be an afterthought.
• 2:18
  Speaker 0: It's a real signal that some players think assets are undervalued.
• 2:22
  Speaker 1: And on top of that, you have geopolitical risk.
• 2:25
  Speaker 0: That's the other layer.
• 2:27
  Speaker 0: Bobby Bray's analysis made it clear that national security reviews aren't the exception anymore.
• 2:32
  Speaker 0: They're standard procedure.
• 2:34
  Speaker 1: And not just in obviously sensitive sectors.
• 2:36
  Speaker 1: No,
• 2:36
  Speaker 0: it's broader now.
• 2:37
  Speaker 0: It hits.
• 2:38
  Speaker 0: valuations, timelines, even how you plan your integration if the target has assets or tech in certain jurisdictions.
• 2:45
  Speaker 1: So with all this pressure high rates, volatility, regulatory hurdles, it seems like the old execution model is breaking down.
• 2:51
  Speaker 1: It
• 2:51
  Speaker 0: is.
• 2:51
  Speaker 0: Which is why Kitson Patel's advocacy for what he calls buyer-led M&A is so interesting.
• 2:57
  Speaker 1: Explain that a bit.
• 2:58
  Speaker 1: It sounds like a shift in mindset.
• 3:00
  Speaker 0: It's a huge shift.
• 3:01
  Speaker 0: M&A was often... you know, a reactive game.
• 3:04
  Speaker 0: The seller sets the pace.
• 3:06
  Speaker 0: Patel is saying the buyer needs to be proactive from day
• 3:10
  Speaker 1: one.
• 3:10
  Speaker 1: But doesn't that risk deal leakage?
• 3:13
  Speaker 1: or just overwhelming the target.
• 3:15
  Speaker 0: That's the tension, isn't it?
• 3:16
  Speaker 0: But the argument is that this approach actually leads to faster decisions and a higher certainty of close.
• 3:21
  Speaker 1: Because you're leading with intent.
• 3:22
  Speaker 1: Exactly.
• 3:23
  Speaker 0: The buyer has to define their value thesis way earlier, which loops right back to that disciplined cash flow math we started
• 3:31
  Speaker 1: with.
• 3:31
  Speaker 1: Okay, so if the macro environment is the pressure cooker, due diligence is where you see the cracks.
• 3:37
  Speaker 0: That's a great way to put it.
• 3:38
  Speaker 0: An incomplete diligence is still just a massive value killer, especially in asset heavy industries.
• 3:44
  Speaker 0: Numbers
• 3:44
  Speaker 1: are pretty stark, aren't they?
• 3:46
  Speaker 0: They're shocking.
• 3:47
  Speaker 0: David Salim shared a data point from the resources sector that should honestly make every dealmaker just pause.
• 3:52
  Speaker 1: Okay.
• 3:53
  Speaker 0: Inadequate due diligence leads to eighty-five percent of M&A deals in that sector failing to reach their potential value.
• 4:00
  Speaker 1: Eighty-five percent.
• 4:01
  Speaker 0: That's...
• 4:03
  Speaker 1: that's almost a given that you'll fail if you don't do the groundwork.
• 4:06
  Speaker 0: It's a staggering failure rate, and he frames diligence as giving you three things, knowledge, control, and protection.
• 4:14
  Speaker 1: And that protection piece is increasingly about regulatory exposure, right?
• 4:18
  Speaker 0: Absolutely.
• 4:19
  Speaker 0: This is where cyber comes roaring in.
• 4:21
  Speaker 0: Amy Wilson was very clear on this.
• 4:23
  Speaker 0: You have to get privacy and cyber governance locked down on day one.
• 4:27
  Speaker 0: This
• 4:27
  Speaker 1: isn't theoretical risk.
• 4:29
  Speaker 0: Not at all.
• 4:30
  Speaker 0: She cited the Australian clinical labs case.
• 4:32
  Speaker 0: They inherited system risks, had a breach right after the deal closed.
• 4:36
  Speaker 1: And got hit with a penalty.
• 4:37
  Speaker 1: A
• 4:37
  Speaker 0: five point eight million dollar penalty.
• 4:39
  Speaker 0: It just shows the immediate cost of overlooking the target cyber posture.
• 4:44
  Speaker 1: And managing that risk itself can create bottlenecks.
• 4:47
  Speaker 1: Jeff Jones made a great point that deal.
• 4:49
  Speaker 1: bottlenecks are usually about coordination, not complexity.
• 4:52
  Speaker 0: Right.
• 4:52
  Speaker 0: It's the administrative drag.
• 4:54
  Speaker 0: It just kills momentum.
• 4:55
  Speaker 1: And that lack of coordination.
• 4:57
  Speaker 1: It
• 4:57
  Speaker 0: links directly to what Tuluhan or Demi warned about engaging too many non-exclusive advisors.
• 5:02
  Speaker 0: It just creates chaos.
• 5:03
  Speaker 0: You lose credibility with a buyer.
• 5:04
  Speaker 1: And the deal falls apart.
• 5:05
  Speaker 0: Exactly.
• 5:06
  Speaker 0: It looks messy and uncoordinated to the seller.
• 5:09
  Speaker 1: So shifting gears a bit to valuation.
• 5:12
  Speaker 1: We're seeing a premium on data, it seems.
• 5:15
  Speaker 1: A
• 5:15
  Speaker 0: huge premium.
• 5:16
  Speaker 0: Warren Horowitz noted that targets with a really robust analytics infrastructure are commanding higher multiples.
• 5:23
  Speaker 1: Because it derisks the whole process.
• 5:24
  Speaker 0: It derisks everything.
• 5:26
  Speaker 0: The underwriting, the integration plan, good data just reduces uncertainty, and in this market, that's
• 5:32
  Speaker 1: gold.
• 5:33
  Speaker 1: And because uncertainty is so high, deal structures have to be more flexible.
• 5:37
  Speaker 0: They have to be.
• 5:38
  Speaker 0: Eva Davis shared some great insights on using what she called tariff earnouts to bridge regulatory uncertainty and cross-border deals.
• 5:46
  Speaker 1: So you don't fall into that.
• 5:47
  Speaker 1: time kills all deals trap while waiting for policy clarity.
• 5:51
  Speaker 0: That's the idea.
• 5:52
  Speaker 0: And it's becoming the new normal.
• 5:53
  Speaker 0: We saw some European SME data from Floyd Plettenberg that confirmed it.
• 5:58
  Speaker 0: More
• 5:58
  Speaker 1: than numbers.
• 5:59
  Speaker 0: Earnouts are in thirty nine percent of deferred price deals and vendor loans are in thirty four percent.
• 6:04
  Speaker 0: It just shows that risk sharing is now expected.
• 6:07
  Speaker 1: And that rigor goes all the way down to the accounting details.
• 6:09
  Speaker 1: Oh,
• 6:10
  Speaker 0: you have to be precise.
• 6:11
  Speaker 0: Scott Weevill gave a sharp warning about the non-gap AR trap.
• 6:14
  Speaker 1: Okay, what's that?
• 6:15
  Speaker 0: It's when your target uses cash or modified gap accounting.
• 6:18
  Speaker 0: If your working capital definitions in the deal documents aren't extremely precise, you can get hit with six-figure surprises post-close.
• 6:26
  Speaker 0: It's a tactical but really dangerous blind spot.
• 6:29
  Speaker 1: It's clear that the diligence phase is demanding more detail than ever.
• 6:33
  Speaker 1: But that leads to the big question we always come back to.
• 6:37
  Speaker 1: Why do so many deals still fail?
• 6:39
  Speaker 0: It's the perennial question, isn't it?
• 6:41
  Speaker 0: And Jim McWay reminds us that failure rate is stubbornly stuck, still around seventy percent.
• 6:45
  Speaker 1: Seventy percent.
• 6:46
  Speaker 1: It's just incredible that the number hasn't moved.
• 6:49
  Speaker 0: His take is that the blame lies in a lack of focus on the how, the actual execution.
• 6:55
  Speaker 0: He says playbooks are built in isolation from operational reality.
• 6:58
  Speaker 0: They look great on paper.
• 6:59
  Speaker 0: But
• 6:59
  Speaker 1: they don't survive first contact with the actual business.
• 7:02
  Speaker 1: Not
• 7:02
  Speaker 0: at all.
• 7:03
  Speaker 0: And if that's the problem, Frederick DeVue argues success is all about preparation.
• 7:07
  Speaker 0: He says you have to confirm three things.
• 7:08
  Speaker 1: Okay, what are they?
• 7:09
  Speaker 0: One, map the true operational reality.
• 7:12
  Speaker 0: Two, confirm the acquirer is actually ready to absorb the new entity.
• 7:17
  Speaker 0: And three, and this is key assigned named owners with real bandwidth.
• 7:21
  Speaker 1: That last one is huge.
• 7:22
  Speaker 1: integration can't be a side project.
• 7:25
  Speaker 0: If it's on top of someone's day job, you're planning to fail.
• 7:28
  Speaker 0: And digging deeper, Vandana are stressed that most M&A deals fail because of people, not the numbers.
• 7:36
  Speaker 1: Culture is a strategic risk.
• 7:38
  Speaker 0: It absolutely is.
• 7:39
  Speaker 0: And you need to do behavioral due diligence.
• 7:41
  Speaker 0: You have to treat leadership compatibility and communication style with the same seriousness as a financial audit.
• 7:47
  Speaker 0: Because
• 7:47
  Speaker 1: organizations don't merge, people do.
• 7:49
  Speaker 0: Exactly.
• 7:50
  Speaker 0: And Paul Cohn had a great framework for this.
• 7:52
  Speaker 0: He talked about the gap between claimed system maturity and actual people maturity.
• 7:57
  Speaker 1: What does that look like?
• 7:58
  Speaker 0: A company might claim they're at, say, level four capability, but their people actually operate at level two.
• 8:05
  Speaker 0: They follow the procedure, but they escalate every single exception.
• 8:09
  Speaker 1: And that gap gets exposed under the stress of integration.
• 8:12
  Speaker 0: Immediately.
• 8:13
  Speaker 0: PE firms especially need to assess the resilience of that capability.
• 8:17
  Speaker 1: So you need discipline from the start.
• 8:18
  Speaker 1: Yeah.
• 8:19
  Speaker 1: Daniel Friedman emphasized that early synergy planning is crucial for aligning leadership.
• 8:25
  Speaker 0: It provides that clarity and momentum right after closing.
• 8:28
  Speaker 0: But discipline also means knowing when to stop.
• 8:30
  Speaker 1: Ah, the zombie work streams.
• 8:32
  Speaker 0: Alexis Chevalier's term.
• 8:34
  Speaker 0: And it's perfect.
• 8:35
  Speaker 0: Those initiatives that just consume resources and your best people, but should have been shut down quarters ago, you have to protect your focus.
• 8:44
  Speaker 1: OK, let's wrap up with a look at where the capital is actually flowing.
• 8:47
  Speaker 1: What's the sector and geographic momentum look like?
• 8:50
  Speaker 0: Jonathan Boyers described it perfectly as a two-speed M&A market.
• 8:54
  Speaker 0: Meaning.
• 8:55
  Speaker 0: Tech-enabled services, the modern digital businesses, are really active in getting strong valuations.
• 9:01
  Speaker 0: Meanwhile, the older-style economy businesses are much more sluggish.
• 9:04
  Speaker 1: We're seeing that tech investment in specific places.
• 9:07
  Speaker 0: We are.
• 9:08
  Speaker 0: Look at AECOM buying the AI real estate agent, Consigli, for its AECOM Ventures arm.
• 9:13
  Speaker 0: That's a three hundred and ninety million dollar deal.
• 9:16
  Speaker 0: Man,
• 9:16
  Speaker 1: it's not just a tech play.
• 9:17
  Speaker 1: It's about embedding AI into their core workflows.
• 9:20
  Speaker 0: That's right.
• 9:20
  Speaker 0: And you see consolidation logic elsewhere too.
• 9:23
  Speaker 0: The WSP Jacobs merger which Emma Steele noted is all about getting scale and end-to-end delivery in engineering and environmental services.
• 9:30
  Speaker 1: And health care is another hot spot.
• 9:32
  Speaker 0: Definitely.
• 9:32
  Speaker 0: Sean Janus noted activity was up seven percent in Q three with over five hundred deals.
• 9:38
  Speaker 1: And there are structural drivers there.
• 9:39
  Speaker 1: Right.
• 9:39
  Speaker 0: Huge ones.
• 9:40
  Speaker 0: Alan VanderBart tied biotech M&A directly to the twenty twenty eight twenty thirty patent cliff.
• 9:47
  Speaker 0: It's creating a big push for targets with late stage assets.
• 9:51
  Speaker 1: We even saw some massive bets being placed.
• 9:53
  Speaker 1: A
• 9:53
  Speaker 0: huge one.
• 9:54
  Speaker 0: Christopher Kumar highlighted Abbott's twenty one billion dollar acquisition of exact sciences.
• 10:00
  Speaker 0: That's a transformational bet on precision oncology.
• 10:03
  Speaker 1: And what about geographically?
• 10:04
  Speaker 1: Are we seeing any new hubs emerge?
• 10:07
  Speaker 0: We are.
• 10:07
  Speaker 0: David Hill pointed to the Asia-Pacific region using what he calls transformational M&A interconnected deals to really reposition strategically.
• 10:15
  Speaker 1: And in Europe.
• 10:16
  Speaker 0: Johann Erberg mentioned Sweden is still very strong, but her Wixpringer showed that Barcelona is really emerging as a hub for founder-led tech companies.
• 10:24
  Speaker 0: They're
• 10:24
  Speaker 1: attracting who?
• 10:25
  Speaker 0: A lot of appetite from US and DACH corporates.
• 10:28
  Speaker 0: And finally, on the private side, Philip Herman noted that the focus is still defensive.
• 10:32
  Speaker 0: So,
• 10:32
  Speaker 1: recession-resistant sectors.
• 10:34
  Speaker 0: Exactly.
• 10:35
  Speaker 0: Healthcare, utilities, and a big focus on ad-orn acquisitions rather than huge platform deals.
• 10:41
  Speaker 1: Okay, so if we synthesize all of that, it feels like the theme is rigor.
• 10:46
  Speaker 1: Wigger across the entire deal lifecycle.
• 10:48
  Speaker 0: That's it.
• 10:49
  Speaker 0: From day zero cyber planning to flexible structures like tariff renounce right through to disciplined operationally grounded integration.
• 10:57
  Speaker 1: The market is demanding that granular operational clarity just as much as a good strategic story.
• 11:02
  Speaker 0: Absolutely.
• 11:03
  Speaker 0: The age of deals working just through financial engineering, that's over.
• 11:07
  Speaker 0: You have to deliver value through operational certainty.
• 11:10
  Speaker 0: That's
• 11:10
  Speaker 1: a fantastic takeaway.
• 11:11
  Speaker 1: Now, if you enjoyed this deep dive, new episodes drop every two weeks.
• 11:15
  Speaker 1: And you should also check out our other editions on private equity, venture capital, and strategy and consulting.
• 11:20
  Speaker 0: And we want to leave you with a final thought to chew on.
• 11:23
  Speaker 0: It builds on Lachlan Houston's critique that financial modeling often feels like a bet because it lacks probabilities.
• 11:29
  Speaker 1: Right.
• 11:29
  Speaker 1: So given that stubborn, seventy percent M&A failure rate that Jim McWay highlighted, I'll ask you this.
• 11:35
  Speaker 1: How often is your firm actually modeling the probability of integration success?
• 11:40
  Speaker 1: The how?
• 11:41
  Speaker 1: And not just the best case energy number.
• 11:42
  Speaker 1: Is your diligence truly deep enough to avoid becoming part of that seventy percent?