Best of LinkedIn: M&A Insights CW 29/ 30

00:00:00: Provided by Thomas Allgaier and Frenus, based on the most relevant LinkedIn posts about M&A Insights in calendar weeks twenty-nine and thirty.

00:00:07: Frenous is a B to B market research company supporting M& A consultancies with The Market & Competition perspective for example in commercial due diligence's CDD.

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00:00:32: so welcome today's deep dive.

00:00:34: everyone.

00:00:34: we've got a lot of cover regarding the top M&A trends dominating conversation on LinkedIn.

00:00:39: right now

00:00:39: We really do I mean Today were going unpack this really wild paradox in deal volume.

00:00:45: take look at AIs hidden physical footprint.

00:00:49: get into why cultural integration is still basically ultimate deal killer.

00:00:53: Okay

00:00:53: lets unpack because global market is surging.

00:00:56: Now, in just the first half of year we saw a two point seven-seven trillion dollars flood into market.

00:01:02: Yeah

00:01:03: which is a forty eight percent year over your increase right?

00:01:05: Exactly and The technology sector took the absolute lion's share that cash.

00:01:10: it was the strongest first half for M&A since.

00:01:12: two thousand to Wow!

00:01:14: Two thousand two

00:01:15: yeah but here Is the defining paradox Dominic Deegan and Dr.

00:01:20: Jens Kengelberg from BCG analyzed this, And they found that while tech generated the most deal value it actually scored the absolute lowest on BCG's M&A sentiment index.

00:01:30: Wait really?

00:01:31: So money is flowing aggressively into Tech but The Dealmakers executing transactions are terrified.

00:01:37: Basically yeah They are demonstrating peak caution and Marcus Cooper from Solomon Partners calls this landscape a two-speed recovery.

00:01:45: You have strategic corporate buyers operating on it totally for frequency than private equity,

00:01:50: right?

00:01:50: Because strategists are acting with immense confidence.

00:01:52: they don't have those fun life cycles dictating their timelines

00:01:55: precisely there just consolidating markets in adding capabilities.

00:01:58: But private equity is, well they're kind of constrained right?

00:02:02: Because of stubborn valuation gaps and aging portfolios.

00:02:05: Yeah exactly it drags down their returns if they hold an asset too long so that can't easily deploy fresh capital.

00:02:10: You know Is Private Equity acting like a home buyer waiting for housing market crash?

00:02:14: That simply isn't coming While corporate certificates are just buying the houses They need to live in Right now!

00:02:21: It's brilliant analogy.

00:02:22: but you Know For smaller deals that financing gap actually Just shifted.

00:02:27: David Bruder highlighted a massive regulatory change from the SBA.

00:02:31: that kind of flew under the radar.

00:02:32: Oh,

00:02:32: the loan caps?

00:02:33: Yeah The SPA just doubled the combined seven A and five hundred four loan caps to ten million dollars.

00:02:39: Wow

00:02:40: Ten million.

00:02:41: That is a huge deal for the lower middle market.

00:02:43: It

00:02:44: really is.

00:02:44: it immediately closes the financing gap between traditional SBA sized micro deals And a lower-middle market PE.

00:02:51: so you know deals that didn't pencil out financially in June might suddenly close in July.

00:02:57: That's fascinating, so there is this influx of capital at the bottom but on top end these corporate strategics are deploying massive capital for something else entirely.

00:03:04: Right a huge portion it just trying to keep up with physical demands of AI.

00:03:09: Yeah because we tend think about AI purely as code and cloud or software deals.

00:03:16: Michael Hoyt pointed out that energy M&A deal value rocketed to nearly two hundred and seventeen billion dollars in Q-two.

00:03:23: Oh, wow!

00:03:24: Yeah because the massive power requirements for AI companies can't wait years for new power projects to come online.

00:03:30: they literally have to acquire existing infrastructure.

00:03:32: What's fascinating here is how that urgency extends into digital infrastructure too.

00:03:37: Ella Clark noted Palo Alto Networks twenty four point five billion dollar acquisition of cyber arc

00:03:43: Right which looks like a standard Cyber consolidation on paper.

00:03:47: Exactly, but it's really a strategic pivot toward identity and AI driven security.

00:03:51: And that ties in to a huge warning from Sharei Lili superior.

00:03:55: She argues that AI has completely collapsed the window between a vulnerability existing ended being exploited.

00:04:01: So the concept of adornment risk during due diligence is basically dead.

00:04:04: Totally dead!

00:04:05: Deal teams instantly inherit a target's cyber risks, The moment that deal closes Man...that

00:04:10: is scary.

00:04:11: Hey real quick if you're finding this breakdown helpful make sure your subscribed to Deep Dives so don't miss future additions.

00:04:17: Definitely subscribe.

00:04:18: But speaking at Deal Teams AI Is completely changing people working on these transactions too.

00:04:24: Ermer F. Gouver analyzed A PWC report about it.

00:04:27: Oh

00:04:27: I saw this.

00:04:28: It was about junior M&A analysts right?

00:04:30: Yeah

00:04:31: Instead of just eliminating those junior roles, AI is seniorizing them.

00:04:35: Because the basic data scraping is automated entry-level roles now demand senior skills like strategic thinking.

00:04:42: It's actually grown thirty five percent since twenty nineteen.

00:04:45: But wait I have to push back on that.

00:04:47: if AIs doing all the foundational grunt work How do future analysts?

00:04:51: Actually learn in The Craft right?

00:04:53: isn't it Like handing a graphing calculator To his student who hasn't learned Basic Edition?

00:04:57: That Is Exactly The Issue.

00:04:59: Simone Viscotto calls it unpriced concentration risk.

00:05:02: If AI shrinks a deal team, say A Team of Eight does the work at fifteen.

00:05:06: one person's misalignment carries massive outsized impact on outcome.

00:05:11: Right fewer people means safety nets are basically gone

00:05:13: Exactly.

00:05:14: and this human element is perfect bridge to our final theme because you can use AI to build flawless financial model but if the human beings involved don't click the deal will just self-destruct.

00:05:26: And there is a wild contradiction in the sources about how often that happens, Yannick Greener shared Bain research showing M&A success rates have flipped with seventy percent of deals now succeeding.

00:05:36: Yeah but then Martin McMahon cited HPR Research saying seventy to ninety percent of corporate m&a actually fails.

00:05:42: So wait!

00:05:43: How can both be true?

00:05:44: Well...Bain

00:05:45: measures strategic scale and scope But HPR looks at execution When deals fail.

00:05:51: Eighty-three percent of practitioners blame poor integration execution and sixty eight percent specifically blamed culture.

00:05:58: Here's where it gets really interesting, Cabot Earl brought up the classic example of Daimler & Chrysler.

00:06:03: Oh

00:06:03: right!

00:06:03: The nineteen ninety-eight deal.

00:06:04: Yeah,

00:06:04: Daimlar paid thirty six billion dollars for Chryslor only to sell at nine years later for seven point four billion.

00:06:10: Ouch

00:06:11: Right And It wasn't a flawed strategy...it was just friction between Daimlers' hierarchical process.

00:06:19: And Anshil Agrawal brought up Microsoft's eight billion dollar write down of Nokia for the exact same reason.

00:06:25: Identical cultural clashes between an American top-down style and a Finnish collaborative approach.

00:06:31: You know, these issues start before the ink even dries.

00:06:34: Anavon Sen noted that buyers often walk away during due diligence not because the balance sheet changed but because they lost confidence in founder credibility.

00:06:43: Yeah The preclosed trust deficit is real And if it spills over post-close, its devastating.

00:06:49: Laura Hardin shared this chilling statistic Poor communication after an announcement can erase up to eighty percent of a deal's value in the first ninety days.

00:06:58: Wait

00:06:58: eight or percent?

00:06:59: In ninety dates?

00:07:00: Yeah

00:07:00: because people panic about their jobs instead focusing on work.

00:07:03: But Dermendra Singh suggests that really simple fix.

00:07:06: A direct welcome message from integration manager To every stream leader builds instant alignment.

00:07:11: That makes total sense.

00:07:12: But it gets so complicated with these serial acquirers, Joe Lewin broke down OCS's three point one billion pound acquisition of MIDI.

00:07:20: Oh yeah because MIDI had already acquired over twenty five companies

00:07:23: Exactly!

00:07:24: And one of those targets, Marlowe had acquired eighty companies.

00:07:28: It's literally a corporate matryoshka doll.

00:07:31: You aren't just integrating one culture you are inheriting the stacked unresolved cultural baggage Of a hundred different founders.

00:07:39: If we connect this to The Bigger Picture This is exactly why Culture must be an operational priority on day One Not some HR team building exercise for month six.

00:07:51: Absolutely You

00:07:52: know, it leaves us with something really important to think about.

00:07:55: If AI continues to commoditize financial modeling and quantitative due diligence.

00:08:00: will the M&A deal makers of twenty thirty five be less focused on spreadsheets?

00:08:05: And more focused on organizational psychology like will he ultimate competitive advantage?

00:08:10: simply be human empathy.

00:08:11: that is a fascinating thought.

00:08:13: to leave On if you enjoyed this episode new episodes drop every two weeks.

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00:08:22: Thanks for joining us today's Deep Dive, everyone.

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