[Video] Out IN Front M&A Task Force Discusses Valuation, Optimism and Open Minds

All-star panel of M&A industry stalwarts shares its thoughts on the latest survey results.


17 October 2018

Intralinks Out IN Front Task Force

Earlier this year, Intralinks launched Out IN Front, a real-time market survey that brings the views of mergers & acquisitions (M&A) professionals from across the industry to the fore. Produced in partnership with The M&A Advisor, Out IN Front features a monthly online survey with poll topics created by and for the M&A community — the results of which are then examined and analyzed by an all-star panel of industry experts. 

The first report, encapsulating their collective commentary, will be published in early November. This premier paper focuses on the impacts that current geopolitical and financial events will have on M&A activity over the next 12 months. Following their review of survey findings, the task force got together at our NYC office and shared some important takeaways.

Matt Wells, senior director of strategy and product marketing at Intralinks, saw differing responses across the board — not everything was a simple consensus, which made for interesting insights. On the question of valuation, for example, there seemed to be a solid split down the middle: About half of respondents said they expected valuations to rise 10 percent, the other half anticipated a fall of around 10 percent. Matt takes this to mean that perhaps valuations will stay close to where they are over the coming year, and M&A professionals should project accordingly. 

Matt Wells (above, right): “Tools like the VDR (virtual data room) and the enhancements that have been made to the VDR over time are an essential part of the [dealmaking] process.” 
 

One result from the survey was very surprising to Jacob Yahiayan, founder and managing member of Continental Advisory Services: About 30-35 percent of the respondents said that technology did not have a material effect in their M&A decision-making processes. At a time when so much of the industry makes decisions based largely on technical and analytical data, as well as due diligence data around an M&A, this was an unexpected answer to hear from even a minority of responses. 

The advice he’d give to these people is that they should take a careful look at supply chains of portfolio companies they’re looking to represent. After all, no OEM or service provider works in a vacuum. Even small components of their businesses will come from international sources. After having worked for 35 years and in more than 20 countries, he said that any strong conduit for note-sharing like Out IN Front is important. Fresh angles are always inspiring and can help avoid any questionable practices.  

Jacob Yahiayan (above, right): “Data and technology [are] very important on assessing risk.”
 

Paul Aversano, managing director in Alvarez & Marsal’s private equity services practice, talks about the geopolitical impact of M&A deals and how we seemingly live in a much wider world than ever before. Paul explains that there are just more variables to contend with nowadays. Taken together, he refers to this climate as a “vortex of volatility.” Things that might not seem related — a crisis with the Turkish lira or U.S. public equity markets, for example — can have devastating effects on the M&A market. M&A professionals must keep track of interest rates, employment data, inflation and regulatory issues in the U.S. alone, then factor in global trade, the impact of Brexit on Europe, and more. He feels that the most important action firms can take right now is to make sure they have boots on the ground in all critical areas. That way they can get an accurate picture before making any key deal. 

Paul Aversano (above, right): “In my 25 years of professional experience working in mergers and acquisitions this time is probably the most chaotic.”
 

What really stands out for Gregory Bedrosian, managing partner & co-CEO of Drake Star Partners, is how important the polling and evaluation process is for the industry at large. A lot of times, he explains, insights like these stay in boardrooms or between managers and their clients. They are not shared widely. By offering varying views and adding expert insights, initiatives like Out IN Front really help to shed light on some incredibly important topics. 

Gregory Bedrosian (above, right): “From the audience’s perspective I think [Out IN Front] is a great opportunity to have leaders that are often dealing with these topics in private to be able to have these available and shared with your audience.”
 

Mark Sirower, a principal with Deloitte Consulting LLP and US leader of the merger & acquisition strategy and commercial diligence practice, found the meeting incredibly useful. Even as a 20-year veteran who has seen it all he came away shocked by some of the findings: specifically, in how many companies don’t have any kind of playbook in place for post-merger integrations. 

He offered three pieces of advice: 

  • Issues of culture and post-merger integration (PMI) have to be addressed as part of diligence. 
  • M&A professionals must consider a deal’s day of announcement as a major finish line and a huge day in the life of a deal. Public shareholders will express their confidence by either buying or selling. 
  • The post-merger period can’t be allowed to take away from current company momentum. It’s best to be prepared to make everything as seamless as possible. 

Mark Sirower (above, right): “The day of announcement of a deal, especially if they’re public, that’s a first major finish line. It’s a big pivot point.”
 

Euan Rellie, senior managing director and co-founder BDA Partners, agrees. He feels that it’s important to share best practices and that M&A professionals owe it to themselves as an industry to be doing the best job they can for clients. Sharing best practices minimizes pitfalls. He explains that in an industry with a lot of specific terminologies, things can feel almost deliberately obscure at times. Demystifying, he says, opens up better outcomes. He also believes in building the best teams, full of people who can stay humble and open-minded. Sharing experience and information facilitates this process. In the words of Sir Clive Woodward, a rugby coach he admires, Rellie suggests that managers look for “sponges, not rocks” — people who can take in and learn from new information, not those who are set in their ways.

Euan Rellie (above, right): “M&A is a team sport.”
 

M&A as an industry is now adapting to the accelerated speed of change and helping to drive digital transformation, according to Chris Nuttall, vice president, corporate development & new ventures at Qurate Retail Group. From his perspective, the M&A industry has always been a relationship-driven process, but it’s now becoming increasingly knowledge-driven as well. With initiatives like Out IN Front helping to encourage knowledge-sharing among practitioners, he hopes to see a future in which 80 percent of M&A deals succeed — in contrast with current times in which, he estimates, perhaps 80 percent fail.

Chris Nuttall (above, right) says Out IN Front is “one of the few forums that actually allows different players to share in an environment that enhances the body of knowledge.” 
 

Based on what he heard, Ceasar N. Anquillare, co-founder, chairman and CEO of Winchester Capital, expresses high optimism for M&A markets, especially on the geopolitical stage. He shares that he’s seeing the briskest business he’s ever experienced. M&A activity, he says, will hit another record high by the end of this year, with $4.3 trillion in transactions. He says that Brexit fear has not prevailed, that timing is good, and that capital markets are incredibly favorable. He’s optimistic about the effects of Fed rates. Keep confidence, he tells his colleagues. Stay optimistic. Change is a good thing. 

Ceasar N. Anquillare (above, right) believes “All of us in M&A need to live in hope and know that all change going into the next year will be for the better.”
 

Sign up here to receive the full report when it publishes in early November. And be sure to take part in the new Out IN Front poll.

Editor’s note: Julia Karol, president & COO of Watermill Group; Jim Hooper, vice president of mergers and acquisitions at U.S. LBM; and Robert Profusek, chair, global M&A at Jones Day, also participated in the task force meeting.

Top image by Nicole Petrocchi