So, it turns out I am on something of a mission…
After nearly 20 years of advising clients on their M&A deals, I recently jumped the fence.
I was motivated by a dangerous cocktail of impatience, geekiness and a (potentially misplaced) belief that there was a better way of doing things.
Unfortunately, when I jumped, there wasn't much on the other side of that fence and I realised we'd have to build it. So, I started to explore what technology could do for us in this space.
The M&A industry is incredible:
- every year, trillions of dollars change hands to fund M&A. 2021 was a record year with aggregate deal values of c. US$6tn. Last year, that number exceeded US$3.5tn;
- with the allure of a rewarding career, it attracts some of the brightest minds; and
- investors can afford and access almost limitless data sources to inform their decisions.
Despite these positive indicators, the evolution of the typical M&A process has been painfully slow.
Many of you in M&A will recognise that much of what you were trained to do is strikingly similar to what is still done today.
The picture is even clearer if you focus specifically on how most M&A investors seek to understand risks they might encounter on a particular deal.
Properly sourcing, understanding and sharing that risk data is critical to some of the most fundamental deal decisions, eg:
- go/no-go decisions;
- valuations; and
- how deals are documented – and risks allocated - amongst the parties (and, these days, insurers).
Yet, much like many of the other M&A rituals, the processes followed today in relation to DD findings and other risk data are all alarmingly rudimentary and, I believe, ripe for a material overhaul.
Having spoken to hundreds of leading M&A practitioners worldwide on this subject, it seems that I am not entirely deluded in my belief.
I will share some of the feedback I have received (and will continue to seek-out) from leading industry figures, while also sprinkling in a few of my own observations. And I would love to hear your views.
While I am convinced of the need and opportunity to upgrade the broader M&A process, I intend to start by focusing on one of the least sexy aspects of it…M&A risks, due diligence and the way we understand, socialise and make (and track) decisions based on the risk data.
Of course, AI has a material part to play in this, but the power of AI will be most successfully harnessed when combined with addressing some of the more fundamental challenges.
I appreciate that this isn't a classic dinner party conversation (those who know me best know not to invite me to any dinner parties), but if you have ever had to worry about not screwing up M&A deals, I'd love to hear your views.
In particular, your views on the current M&A due diligence - and related risk management - processes and the extent to which you have seen them evolve over your career / think there is opportunity to improve them.
