Best of LinkedIn: M&A Insights CW 31/ 32

00:00:00: Provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about M&A insights in calendar weeks thirty-one and thirty two.

00:00:08: Frenness is a B to B market research company supporting M& A consultancies with a marketing competition perspective for example in commercial due diligence's CDD.

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00:00:34: Welcome, to The Deep Dive everybody.

00:00:35: so we are basically extracting the top M&A insights and trends circulating across LinkedIn right now completely free of fluff

00:00:44: Right.

00:00:44: just a signal no noise.

00:00:46: You know, what if I told you that in many sectors deal volumes are actually dropping but buyers are happily paying higher multiples than they were a year ago?

00:00:53: It sounds completely backwards.

00:00:54: Yeah

00:00:55: it really does!

00:00:56: But If your're modeling a deal right now the market hasn't slowed down and is just traded into shotgun for sniper rifle?

00:01:02: Oh That's like perfect way to frame it.

00:01:05: The sheer volume of capital being deployed is massive But the conviction required to deploy it has just fundamentally shifted.

00:01:13: Yeah, I mean look at the macro data that Gregory Docko at UI Parthenon highlighted US deal activity over a hundred million dollars actually rose twenty two percent year-over-year in the first half.

00:01:23: wait really yeah.

00:01:25: corporate M&A was up thirty three percent and deal value is ahead of last year by more than fifty percent.

00:01:30: okay help me make sense.

00:01:33: You know, the cost of debt is still a major headwind compared to three years ago.

00:01:37: What is driving a fifty percent spike in deal value?

00:01:40: It's being driven entirely by transformational like capability led acquisitions.

00:01:45: Buyers aren't just purchasing incremental market share anymore.

00:01:48: They're buying the core capabilities they cannot build fast enough.

00:01:51: internally, specifically around AI and digital infrastructure... ...they are making these massive high-conviction bets!

00:01:58: And we were seeing that appetite globally too like Daniel Kennedy pointed out that Singapore M&A more than doubled to seventy seven point four billion dollars in the first half.

00:02:06: That is a huge signal.

00:02:08: It really.

00:02:08: it shows renewed strategic momentum across the broader Asia Pacific region.

00:02:12: Yeah

00:02:13: But I want to go back this idea of High-conviction bets.

00:02:17: Yeah, because this is where the dynamic gets a little counterintuitive.

00:02:20: You're thinking of the middle market data?

00:02:22: I am yeah.

00:02:23: Look at what Dirk Mias noted regarding the Belgian Market.

00:02:27: The actual transaction count like the raw number of deals getting across the finish line declined

00:02:33: right

00:02:33: yet It was still one of the strongest first halves in recent years.

00:02:37: why?

00:02:38: Because deal makers are concentrating all their available capital into fewer Highly strategic targets.

00:02:45: Yeah, they are passing on the good enough deals to bet The farm on the pristine assets.

00:02:50: exactly and Alan Peterson showed us this is happening all the way down To Main Street size business transactions in q-two the volume of closed main street deals actually fell ten percent.

00:03:00: Wow But the average cash flow multiple rose two percent which

00:03:03: means if fewer deals Are closing lack of demand should theoretically drive multiples Down.

00:03:09: But we are seeing the exact opposite.

00:03:12: if buyers or using that sniper rifle We talked about they're waiting patiently in the weeds for the absolute perfect high quality shot.

00:03:20: The problem is every other buyer.

00:03:22: Is looking at that exact same pristine asset through their own scope.

00:03:26: Yep, and I really are

00:03:28: so when an eight-tier company comes to market you get a bidding war That drives them multiple through the roof while the B-tier companies just sit untouched.

00:03:36: And if you are, y'know...the corporate development officer who finally wins that bidding war You now have a totally new problem

00:03:43: Right?

00:03:43: You've paid a massive premium.

00:03:45: Exactly The pressure to justify this valuation to your investment committee forces you to get incredibly creative with how actually structure the deal and price risk.

00:03:55: Yeah If you're holding out for that single sniper shot YOU ARE INEVITABLY GONNA END UP PAYING TOP DOLLAR.

00:04:00: And that's exactly what is forcing this massive wave of structural creativity we're seeing right now.

00:04:04: Oh,

00:04:05: absolutely!

00:04:06: Which brings us to the prismian acquisition at ATCOR.

00:04:09: Charmipandia posted a great breakdown on their USDTUSD all-cash deal.

00:04:13: The headline valuation is nine point eight times twenty-twenty five enterprise value.

00:04:20: Right, which is steep.

00:04:21: Very but the acquirer is relying heavily on an estimated one hundred and fifty million dollars in targeted annual run rate synergies over three years And that effectively brings them multiple down to seven point one times.

00:04:34: Yeah It's a classic synergy led pricing model.

00:04:38: They are leaning on future operational efficiencies To justify paying a twenty-three percent premium.

00:04:44: today I

00:04:44: have to push back on this though Because we see these synergy models all the time.

00:04:48: Oh

00:04:48: constantly,

00:04:49: right is relying on hundred and fifty million dollars in theoretical future cost savings.

00:04:53: Yeah to justify a premium.

00:04:55: just it you know fancy math trick to accuse the board.

00:04:58: or Is that a legitimate?

00:05:00: Pricing strategy because a lot of those synergies never actually materialize.

00:05:04: Well,

00:05:04: I mean it becomes a math trick if the first time acquirer tries to use It without the integration muscle To Actually extract Those savings.

00:05:11: their point but it is A highly legitimate Strategy If you have The operational track record and prismian Explicitly Sites Their previous successful integrations like general cable And encore wire.

00:05:21: yeah They Have A repeatable battle-Tested playbook for Extracting Those Exact Types Of Efficiencies.

00:05:28: so they're Really Underwriting Their Own Operational competence.

00:05:31: Okay, so they're essentially pricing in their own execution capability.

00:05:34: But what happens when the execution timeline is completely out of your control?

00:05:38: for things get wild?

00:05:39: Yeah

00:05:40: Jeff Schmidt highlighted a highly unusual structure In The Delayed Paramount No Warner Bros discovery deal regarding regulatory hurdles.

00:05:48: The ticking fee, this is such a brilliant mechanism!

00:05:52: Right... the deal was currently stalled due to antitrust suits.

00:05:55: from what?

00:05:56: Twelve states and the Writers Guild.

00:05:58: they cannot legally close until those challenges resolve which could be June twenty-twenty seven Which

00:06:03: is forever in deal time.

00:06:04: Exactly so.

00:06:05: Warner Bros Discovery negotiated a ticking.

00:06:08: If the transaction closes after September thirty twenty-twenty six, The purchase price increases by twenty five cents per share per quarter accruing daily.

00:06:16: Accruing

00:06:17: Daily which works out to over seven million dollars a day.

00:06:20: added To the price tag it's

00:06:21: static.

00:06:22: every single Day of regulatory delay cost paramount seven million Dollars.

00:06:25: but why structure It that way?

00:06:27: Well,

00:06:28: it's really about the time value of money and risk transfer.

00:06:31: I mean ticking fees are super common in debt financing to compensate lenders for committed capital.

00:06:36: right but they're incredibly rear-in-large US public equity mergers.

00:06:42: It compensates the target shareholders while they wait in limbo makes sense But more importantly it puts an immense agnizing economic incentive on the buyer To push through those regulatory hurdles as fast as humanly possible.

00:06:55: seven million dollars a day completely alters the buyer's capital allocation strategy because they have to keep that cash liquid.

00:07:05: If you are finding this breakdown of deal structures useful for your own modeling and prep, make sure that you're subscribed so we catch our next deep dive.

00:07:13: We get into the level of mechanical detail every time!

00:07:33: And it only gets released to the sellers if they retain at least eighty-five percent of designated key sales employees.

00:07:39: Right!

00:07:40: I find this fascinating because...it completely shifts the balance of power.

00:07:46: Usually, the C-suite gets their massive payouts at the closing dinner.

00:07:49: Exactly.

00:07:50: But a clause like that means the buyer acknowledges there aren't just buying IP They are buying the human revenue engine.

00:07:56: Yeah, it makes talent retention a hard structural financial metric rather than just some soft HR concern.

00:08:03: It gives those key sales reps massive invisible leverage because

00:08:06: if few top performers walk the executives literally lose at ten million dollar payday

00:08:11: precisely.

00:08:12: but you know it also highlights a broader point about M&A structures.

00:08:16: what things look like on the surface isn't always how they function.

00:08:19: under.

00:08:20: Oluwala Kande shared an analysis of the twenty nineteen access bank and Diamond Bank combination that perfectly illustrates this.

00:08:27: Ah yes, The Scheme Of Merger

00:08:28: Right!

00:08:29: Commercially Legally And In Every Press Release It Was Marketed As A Merger Of Equals But An IFRS Review Of The Audited Financial Statements Proved it was accounted for Strictly as An Acquisition

00:08:40: Because Under IFRS Three Accounting Standards There Is Simply No Such Thing As Merger Accounting.

00:08:46: Wow, really?

00:08:47: Yeah.

00:08:47: One entity must be identified as the acquirer.

00:08:50: they had to run a full purchase price allocation identify intangibles at fair value and recognize billions of Naira in goodwill on The Balance

00:08:59: Sheet.

00:08:59: What does it actually mean for the business?

00:09:01: post-close though Like, why does recognizing all that Goodwill actually matter?

00:09:06: Because Goodwill isn't just a placeholder number.

00:09:08: You know it sits on your balance sheet and is subject to annual impairment testing.

00:09:13: Okay So if the acquired business underperforms the original valuation models you have to write down That good will which hits Your net income directly.

00:09:21: Oh ouch Yeah.

00:09:23: so The PR team can call It a merger All day long But the accountants are building A mechanism that Will hold future earnings hostage To the initial deal price

00:09:32: which brings us to the most critical phase of this whole process, because you know clever deal structuring taking fees PR spend means absolutely nothing if you don't actually understand the operational reality of the asset.

00:09:44: You just bought Absolutely

00:09:45: Nothing.

00:09:46: and Because multiples are so high right now diligence is fundamentally shifting from a procedural checklist To a forensic diagnostic.

00:09:55: Fernando Gilrichera framed this perfectly.

00:09:58: He argues that financial due diligence functions as an MRI of the business, not a cold financial report.

00:10:05: I love that framing.

00:10:06: it's like buying a house.

00:10:08: standard due diligence is getting a home appraisal.

00:10:10: It tells you what the houses worth today based on the square footage and the comparables in the neighborhood right.

00:10:15: but forensic diligence is hiring a structural engineer to tell you if the foundation's gonna collapse into a sinkhole next Tuesday, because the original owner didn't pull the right permits.

00:10:25: That is great analogy.

00:10:27: and those sinkholes are usually operational or legal failures that don't show up in standard trailing twelve month EBITDA calculation.

00:10:35: On a single point it out deals rarely die over disagreement on price.

00:10:39: they died in diligence of unresolved ownership.

00:10:42: You gave some terrifying examples too like a contractor who built the company's core software product but never actually signed an IP assignment or departed co-founder, who left in twenty nineteen with eight percent equity on handshake and was just never formally bought out.

00:10:57: And why do those things kill deals?

00:10:59: It's not because they are unfixable, it is just that they take months of painful legal negotiation to fix.

00:11:04: Right?

00:11:05: It completely breaks the momentum in the transaction and worse its surface exactly when a seller has the least leverage forcing buyers to aggressively re-trade their terms to account for newly discovered legal risk.

00:11:18: So if you're trying avoid those sinkholes what does world class diligence actually look like?

00:11:24: Taberby Benedict argued most average buyer's diligence over three years of target performance.

00:11:29: But the highly successful buyers, The ones who actually capture value.

00:11:33: The diligence for next ten years?

00:11:35: It is a profound shift toward analyzing revenue durability.

00:11:39: Benedict notes that customer concentration Is the quietest value killer in the middle market.

00:11:43: Oh absolutely.

00:11:44: If top customer has no formal contract No change of control consent clause And their loyalty Strictly tied to selling founders personal relationships That isn't Revenue

00:11:54: It's rented margin.

00:11:56: If the business cannot literally function without the founder's daily intervention, you have to factor in the immense cost of replacing that operational capacity before he can even begin to underwrite your valuation.

00:12:07: multiple

00:12:07: exactly and looking ahead at the next ten years of risk also means understanding data infrastructure right.

00:12:13: Bojan Radidichic brought up a critical modern diligence blind spot regarding digital sovereignty.

00:12:19: Oh The European data hosting issue.

00:12:21: Right, in European M&A just because a target company hosts its deal data on servers physically located inside Europe doesn't guarantee that data falls outside non-European jurisdiction

00:12:32: Because the server location is just the superficial layer.

00:12:34: Exactly!

00:12:35: M&a risk management now requires digging into sub processors.

00:12:39: Where do integrated AI features actually process the DEAL data?

00:12:43: That's great question.

00:12:44: If a non-European authority issues a subpoena for your virtual data room, can you cloud provider be legally compelled to hand it over?

00:12:51: Surface level certifications like ISO twenty seven thousand or one just don't answer those deep jurisdictional questions.

00:12:58: So tying this all together the best due diligence isn't a defensive exercise in finding typos to kill a deal.

00:13:05: It is A highly aggressive evidence gathering mission To correctly price The risk You're strapping to Your own balance sheet For the next decade.

00:13:12: That Is the perfect summary.

00:13:14: But here's the brutal reality.

00:13:17: You can do a flawless MRI, you can structure the deal with watertight ticking fees and retention holdbacks... ...you can sign the papers!

00:13:25: Yeah

00:13:25: but the ultimate test of the deal is the post-merger integration.

00:13:29: The graveyard of expected synergies.

00:13:32: Richard Stroop and David Tang shared some incredibly sobering statistics on this.

00:13:36: Up to ninety percent of M&A deals failed to hit their original objectives.

00:13:40: Ninety

00:13:40: percent?

00:13:40: Yeah,

00:13:41: Tang highlighted a white paper compiling fifty real-world post merger integration case studies across twenty five industries.

00:13:48: And the conclusion is just stark The vast majority of mergers simply fail to capture they're expected synergies.

00:13:53: because

00:13:54: you know even though multiples tell You a business as mathematically profitable But they tell you absolutely nothing about whether the two corporate cultures are fundamentally compatible Value is usually one or lost.

00:14:04: in the eighteen months surrounding this signing.

00:14:07: Which makes me wonder, if we have decades of data proving that integration is where value's destroyed why do so many smart highly experienced corporate development teams still treat integration as a post-closing administrative chore instead of day one strategic priority?

00:14:25: Well it really comes down to what Darmenders Sing and Clint Hendrick call integration debt.

00:14:29: It's a brilliant concept.

00:14:30: Integration debt?

00:14:31: Yeah,

00:14:31: integration debt starts accumulating long before day one.

00:14:35: it is the compounding effect of small overlooked early decisions that quietly erode the acquisitions value even when your project management dashboard is showing all green lights.

00:14:45: and that usually accumulates because organizations treat completely isolated silos, right?

00:14:54: Completely

00:14:54: isolating.

00:14:55: Yeah Simone Vascato argued that acquirers who keep these teams separate are essentially letting their post merger risk go completely untested against operating reality.

00:15:03: Exactly the deal team builds a flawless thesis in Excel signs The paper collects there bonus and then hands the keys over to the integration Team to somehow make those theoretical spreadsheet based synergies or reality Right.

00:15:18: good luck with

00:15:18: that.

00:15:18: exactly it's a recipe for disaster.

00:15:21: But this is actually where AI is driving a structural shift.

00:15:25: Vascato noted that AI tools are starting to compress the gap by pulling integration modeling upstream into the diligence phase much earlier, flagging execution risks than a manual team would just miss

00:15:36: entirely.".

00:15:44: David Fubini talks about the personnel cascade.

00:15:46: Oh,

00:15:46: this is so important?

00:15:47: Yeah It's this sequential high stakes leadership selection process.

00:15:51: You have to select and align roughly sixty tier one in Tier two leaders before The legal close

00:15:56: because if you wait until after the clothes To figure out reporting structures you trigger mass anxiety?

00:16:01: The top talent immediately starts updating their resumes And you've lost the culture Before you even take the reins.

00:16:06: but when you actually get the culture right it acts as an incredible multiplier.

00:16:11: Matthew Mackie shared a perfect case study of this Arcadis' acquisition of AYH.

00:16:15: He called it a psychological masterclass in integration.

00:16:19: Instead of enforcing immediate corporate subjugation, they protected personal autonomy.

00:16:24: They left the acquired teams alone to deliver their work.

00:16:27: Wow!

00:16:28: Yeah...they

00:16:29: respected tribal identity by making rebranding phase two-year transition not day one mandate.

00:16:36: And most importantly Uh, they offered status reciprocity.

00:16:40: Status reciprocity?

00:16:41: Tell me more about how that works in practice.

00:16:43: So status reciproacity means they actively promoted acquired AOIH leaders into major global roles within the parent company.

00:16:50: Oh, that's smart.

00:16:50: Very.

00:16:51: They didn't just export their own legacy executives downward to manage the newly-acquired asset.

00:16:56: When an acquired team sees their own cures being elevated to global leadership The acquisition psychologically transforms from a hostile takeover Into a massive career vehicle.

00:17:07: Man, it's the ultimate antidote to integration debt.

00:17:10: And what's fascinating is how technology is suddenly enabling entirely new operating models for managing this entire life cycle.

00:17:17: Nishkar Shrivastava highlighted an incredible conversation with Austin Johnson, who runs Zapier's entire buy-side M&A function.

00:17:25: As

00:17:25: a one person team?

00:17:26: A One Person M&a Team!

00:17:28: It's crazy.

00:17:29: he is utilizing AI tools like Claude Code to connect all his internal systems review inbound CIMs and basically automate the grueling repetitive parts of deal flow

00:17:41: Which is terrifying for traditional private equity firms, honestly.

00:17:44: It proves that AI and M&A isn't just about efficiency.

00:17:47: it's a fundamental design shift in how deal teams operate right?

00:17:50: Right!

00:17:50: It allows the single corporate development officer to process an inbound opportunity model the financials And issue an indication of interest In the time it takes at traditional top-heavy PE firm To just format an excel sheet.

00:18:02: Yeah Speed to term sheet wins deals on the middle market.

00:18:04: It creates

00:18:05: massive asymmetrical leverage.

00:18:07: But you know even with all that speed and AI capacity You still need the judgment.

00:18:11: Always, The numbers in AI get you to the table.

00:18:14: but psychology is what actually gets through integration and that's a perfect place for you.

00:18:19: with final thought especially if your modeling lower middle market or private deals right now.

00:18:26: We saw some profound insights from Mary Joyce and Eva Davis this week.

00:18:30: Mary Joyce noted that founder-led acquisitions actually contain three distinct negotiations occurring simultaneously.

00:18:37: And Eva Davis emphasized, when acquiring family owned businesses things like long term stewardship cultural alignment and legacy are weighed just as heavily by the seller as financial metrics.

00:18:49: So if you think your just negotiating a multiple You're probably losing this deal

00:18:52: Precisely!

00:18:53: Consider next target Are you just negotiating the EBITDA multiple?

00:18:57: Or are you secretly negotiating the founder's ego, their family's legacy and their personal identity?

00:19:03: Wow.

00:19:03: The buyers who understand that they're navigating that invisible third negotiation... They are the ones to win this asset!

00:19:10: And more importantly…they actually capture value in year two and beyond.

00:19:14: If you enjoyed our episode new episodes drop every two weeks.

00:19:18: Also check out other editions on PE Value creation PE Exit strategies Venture capital private equity fundraising, and strategy in consulting.

00:19:28: Thanks so much for joining us on this deep dive!

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00:19:33: Until

00:19:33: next time…don't just appraise the house—make sure to check out The Foundation.