Best of LinkedIn: M&A Insights CW 37/ 38

00:00:00: provided by Thomas Allgaier and Frennis, based on the most relevant posts on LinkedIn about M&A Insights in CW-Thirty-Seven and Thirty-Eight.

00:00:08: Frennis is a BDB market research company supporting M&A Consultancies with the market and competition perspective, for example, in commercial due diligence.

00:00:16: Welcome back to the deep dive.

00:00:19: This week we're diving straight into what's been really moving the needle in the M&A world.

00:00:24: We've sifted through LinkedIn insights from the last couple of weeks.

00:00:27: Our goal here is to translate that feed directly into, well, actionable intelligence for you, whether you're in strategy, PE, VC, or consulting.

00:00:34: Exactly.

00:00:35: And this isn't just a rundown of headlines.

00:00:36: What we're seeing and what the source has really highlighted is a market that demands real precision.

00:00:41: There's a definite pivot toward strategic scale plays, a real need for discipline in diligence and integration, and then, of course, heavy action in sectors like cybersecurity and healthcare.

00:00:51: We really need to unpack the so what behind these shifts.

00:00:54: That's where the value creation or destruction happens.

00:00:57: Okay, let's kick off with a macro picture.

00:00:59: Deal flow and market tone.

00:01:01: The big takeaway seems to be strategic scale plays are front and center.

00:01:06: Boards seem to be prioritizing fewer, more meaningful deals over, you know, just lots of small add-ons.

00:01:12: Yeah, it suggests capital is getting more selective.

00:01:14: And the bar for, let's say, synergy potential, it's definitely higher.

00:01:18: Which seems to be having an effect on deal speed.

00:01:20: Yeah.

00:01:21: A bit faster execution.

00:01:22: It

00:01:22: does seem that way, which is, well, a promising sign.

00:01:25: Francisco T. pointed out average close times actually dropped about four percent in And in North America.

00:01:31: specifically, timelines went from, what, two hundred seventy-one days down to two hundred and fifty-two.

00:01:37: Wow.

00:01:37: Okay.

00:01:37: Yeah.

00:01:38: And it's not just admin efficiency.

00:01:39: It probably signals more front-loaded diligence, more aggressive maybe, stronger buyer leverage earlier on.

00:01:45: Right.

00:01:46: But that North American speed, it... contrasts a bit with Europe, doesn't it?

00:01:49: It does.

00:01:50: Europe held steady around two hundred and fifty-five days.

00:01:53: They're often dealing with, you know, complex cross-border disclosure rules.

00:01:56: And then you have emerging markets like India, C.A.

00:01:59: Akash Khanduja mentioned something interesting there.

00:02:01: Yeah, the deal count in India is down, like double digits down.

00:02:04: How about the values?

00:02:05: The transaction values are huge.

00:02:07: We're talking, what, fifty billion dollars in the first half of twenty twenty-five alone?

00:02:11: So fewer deals, but massive ones.

00:02:13: Exactly.

00:02:13: That's India Inc.

00:02:16: Moving away from that scattergun approach towards what you might call conviction investing.

00:02:21: Big bets on strategic sectors, especially tech or renewables.

00:02:25: Which brings us back to valuation.

00:02:27: discipline, I suppose.

00:02:28: High risk needs high conviction.

00:02:30: Absolutely.

00:02:31: And the conversation around valuation isn't just about EBITDA multiples anymore.

00:02:35: It's drilling down into earnings, quality, concentration risk, and, crucially, cash conversion.

00:02:42: You know, trying to avoid those nasty, post-close surprises.

00:02:46: We also need to remember the M&A landscape isn't uniform.

00:02:49: Edward Lent made a really good point comparing the huge deals we often talk about with Main Street transactions.

00:02:54: That's key.

00:02:55: Those Main Street deals make up, what, ninety-eight percent of U.S.

00:02:58: businesses?

00:02:58: Huge number.

00:02:59: Yeah, and it's a totally different world for lower middle market funds.

00:03:02: You're typically dealing with business brokers, asset purchases, single-bitter negotiations, not auctions.

00:03:08: And the fees are different, too.

00:03:09: Dramatically

00:03:10: different.

00:03:10: Success fees average eight percent to fifteen percent on Main Street versus maybe two percent to six percent for the larger deals.

00:03:17: So deploying capital there means a totally different playbook.

00:03:20: relationship-based sourcing, different cost structure.

00:03:23: Right.

00:03:23: That initial handshake, that trust is vital, which kind of leaves us nicely into risk mitigation and diligence.

00:03:30: Jim Friesen emphasized the letter of intent, the LOI, saying a strong one can basically make or break a deal early on.

00:03:37: It really can.

00:03:37: It's that first test of good faith, sets expectations, builds trust.

00:03:42: A weak LOI might signal the seller is already hedging.

00:03:45: OK,

00:03:45: so trust is established, then comes the firewall.

00:03:48: Financial due diligence, FDD.

00:03:50: Yep.

00:03:51: And Dhruv Malhotra from Alvarez and Marcell broke it down into three critical pillars, going way beyond just headline profit.

00:03:57: Pillar one, quality of earnings, QoE, making sure profits are real and sustainable.

00:04:02: Exactly, not inflated by one-offs or pulling revenue forward.

00:04:06: Pillar two.

00:04:07: Net debt.

00:04:07: This is where buyers can really get burned.

00:04:09: Hidden liabilities, litigation costs, undisclosed debt, it all hits the equity value directly.

00:04:15: And the third one.

00:04:16: often missed.

00:04:17: Networking capital, NWC.

00:04:19: You have to ensure that short-term liquidity number is accurate.

00:04:23: If it's overstated, bang, you've got a cash crunch right after closing.

00:04:27: So the financials have to be rock solid.

00:04:29: But David Hauser brought up culture.

00:04:31: Right.

00:04:32: He argued culture is ultimately what decides if a merger sticks long term.

00:04:35: And that culture, it sits with the middle managers.

00:04:38: The ones translating strategy into action.

00:04:40: Precisely.

00:04:41: If you sideline them during diligence and planning, you're basically planting cultural landmines.

00:04:46: Okay, and beyond culture, there are these specialized diligence areas, particularly for tech or... Brand heavy deals.

00:04:53: IP, for instance.

00:04:54: Absolutely critical.

00:04:55: Mark Campania stressed this.

00:04:56: You need to verify the chain of title.

00:04:58: do they really own it.

00:05:00: Check freedom to operate.

00:05:01: FTO, can you actually use the tech without infringing?

00:05:04: And license transferability.

00:05:06: Non-negotiable.

00:05:07: Owning IP isn't enough.

00:05:09: You need to know you can legally deploy it day one.

00:05:11: That diligence mindset applies even to purely digital assets, right?

00:05:15: Like, to me names.

00:05:16: Definitely.

00:05:17: Akos Bajorfi shared a great cautionary tale, the VigParkalo.hu parking

00:05:23: garage case.

00:05:24: What happened there?

00:05:25: Buyers thought they bought the whole business.

00:05:28: Seller intentionally left the domain name out of the asset purchase agreement.

00:05:32: Ouch.

00:05:33: So they owned the garage but lost the website.

00:05:35: Essentially

00:05:36: lost their digital front door.

00:05:38: It shows domains are standalone assets.

00:05:40: Asset deals must explicitly list digital keys for transfer.

00:05:45: The common thread here seems to be, integrity or lack thereof.

00:05:49: Absolutely.

00:05:49: Brian Dukes mentioned deals falling apart post-LOI because of founder mistakes, missed forecasts, hidden issues.

00:05:56: Like undisclosed criminal charges even.

00:05:58: Right.

00:05:59: And Alice in Dent's story really hits home on trust.

00:06:02: A seller running a parallel process after signing exclusivity.

00:06:05: That kills the deal.

00:06:06: Instantly.

00:06:07: Doesn't matter how good the financials look.

00:06:09: Broken trust is, well, impossible to fix.

00:06:11: And that failure, whether it's diligence or trust, leads straight into why integration is so notoriously difficult.

00:06:17: Yeah.

00:06:17: Oliver Knapp and Sviatislav Birulin cited that famous stat, fifty to seventy percent failure rate in delivering expected value.

00:06:24: Thomas H. Kessler put it bluntly, deals fail on integration, not strategy.

00:06:30: It's where the rubber meets the road, or doesn't.

00:06:33: So if integration is the make or break phase, you need quick wins.

00:06:37: Tactical stuff.

00:06:37: Like

00:06:38: procurement.

00:06:38: Procurement comes up again and again.

00:06:40: Michael Jonas, Oliver Knapp, they highlight it as an immediate lever.

00:06:44: Potentially, ten, fifteen percent cost savings.

00:06:46: But where do those savings come from?

00:06:48: The key is overlap in non-core, non-strategic spend.

00:06:53: Things like IT services, maybe real estate.

00:06:56: You need structured category strategies to unlock it.

00:06:59: But that's immediate cash to fund the harder parts.

00:07:01: Okay, so quick wins help, but you need structure for the whole process.

00:07:05: Thomas H. Kessler talked about three decisive leadership events.

00:07:09: Executive alignment, week one engagement, and synergy prioritization.

00:07:13: Clarity on org design, decision rights.

00:07:15: that needs to happen before day one, week zero thinking.

00:07:18: And that week one engagement piece ties back to the middle managers again, right?

00:07:22: Exactly, David Hauser's point.

00:07:23: You need them involved early.

00:07:24: They're the trusted voice during uncertainty.

00:07:26: Their buy-in prevents the whole thing grinding to a halt.

00:07:29: What about

00:07:29: practical techniques, especially if things are moving fast?

00:07:33: Anastasia B advocated for a light integration in the first hundred days.

00:07:37: Keep core systems running side by side.

00:07:39: Parallel systems.

00:07:40: Yeah, with simple data bridges for just the key numbers.

00:07:43: Focus early standardization only on critical things like reporting metrics, supply chain visibility, minimize that massive disruption full murderers often cause.

00:07:53: Sounds pragmatic, but integration also needs governance.

00:07:56: Someone has to own it.

00:07:57: Absolutely.

00:07:59: Danny Davis asked the right questions.

00:08:00: Who's accountable for synergy delivery?

00:08:03: Who owns the new budget?

00:08:04: Where are decisions really made?

00:08:06: And

00:08:06: Nicholas Yamaguchi offered that DOC model, deal intent, operating model, structure, external pressures.

00:08:13: Right.

00:08:14: The point being, move beyond generic checklists.

00:08:18: Tailor the integration strategy to the specific deal intent and its unique

00:08:21: pressures.

00:08:22: Okay, let's switch gears to specific sectors getting a lot of attention.

00:08:26: Cyber security is huge.

00:08:27: Massive day one priority.

00:08:28: Buyers are really stressing cyber due diligence, data leak risks, integration dependencies, it's top of mind.

00:08:34: And the stats back it up.

00:08:36: Shavor MJ noted something pretty stark.

00:08:38: Yeah, sixty seven percent of M&A failures apparently stem from inadequate cyber due diligence.

00:08:43: That's huge.

00:08:45: So where's the consolidation happening within cyber?

00:08:47: Focus seems to be on identity management, application security, and tools close to developers, things that help reduce complexity and that constant alert fatigue.

00:08:56: And AI M&A.

00:08:58: That's a different beast.

00:08:59: Totally.

00:09:00: Katya Pimenova explained that when you acquire an AI-first company, diligence shifts hard towards the tech itself.

00:09:06: Source code, yes, but also lawful data ownership.

00:09:10: Model governance.

00:09:11: Model governance.

00:09:12: Like bias and explainability.

00:09:14: Exactly.

00:09:14: Plus the usual talent retention, which is maybe even more critical with AI experts.

00:09:19: And we're seeing deals happen.

00:09:20: Oh yeah.

00:09:21: Money's flowing.

00:09:21: Nick Leongas, Daniel Kennedy mentions Sentinelone buying promised security, F-Five buying Calypso AI, and Mike Privet highlighted a really interesting one, Mitsubishi electric buying nozomi networks for a billion dollars.

00:09:33: A traditional industrial buying into OT security.

00:09:36: Exactly.

00:09:37: Shows that convergence

00:09:38: trend.

00:09:38: Industrial giants strategically moving into digital security at scale.

00:09:42: Okay, let's pivot one last time.

00:09:44: Healthcare and biotech.

00:09:45: Also seeing strong activity.

00:09:47: Definitely.

00:09:48: Despite the economic climate, there seems to be a renewed, almost aggressive appetite for late-stage assets.

00:09:53: What's driving it?

00:09:54: Big deals, often with creative structures.

00:09:57: Alistair Matchett detailed Pfizer's plan's seven point three billion dollar.

00:10:00: acquisition of Metzra.

00:10:02: The weight loss drug space.

00:10:04: Right.

00:10:04: Largest deal there to date.

00:10:05: But interestingly, it includes two point four billion dollars in milestone based contingent value rights or CVRs.

00:10:12: So sharing the risk.

00:10:13: Textbook example.

00:10:15: adapting deal terms because the asset valuation is inherently uncertain.

00:10:18: Any

00:10:19: other big ones?

00:10:20: Anisfan DeSadi noted Roche buying eighty-nine bio for over two billion dollars.

00:10:25: Again, big pharma showing sustained interest, especially at that interception of tech and biotech.

00:10:30: So looking back over these last two weeks, the big picture seems to be interconnectedness.

00:10:36: I think that's exactly it.

00:10:37: M&A isn't just a series of steps.

00:10:39: Success demands focusing on the whole system, how the pieces interact.

00:10:43: Which brings us to that final thought.

00:10:45: Referencing Kiesin Patel, M&A is definitely not a straight line LOI to close.

00:10:50: Not at all.

00:10:50: He frames it as managing three interconnected levers, constantly feeding back into each other.

00:10:55: Deal structure, due diligence, and integration strategy.

00:10:59: Like

00:10:59: a closed system.

00:11:00: Exactly.

00:11:01: Change one.

00:11:02: You have to adjust the others.

00:11:03: Add CVRs to the deal structure like Pfizer did.

00:11:06: That immediately impacts your integration timeline and maybe the depth of diligence needed on certain milestones.

00:11:13: You can't manage it like a checklist.

00:11:14: You have to manage it dynamically, always balancing those three things.

00:11:18: It's a system.

00:11:19: If you enjoyed this episode, new episodes drop every two weeks.

00:11:22: Also, check out our other editions on private equity, venture capital, and strategy and consulting.

00:11:27: Thank you for joining us for this deep dive.

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