Best of LinkedIn: M&A Insights CW 41/ 42

00:00:00: Provided by Thomas Olguyer and Frenas, based on the most relevant posts on LinkedIn about M&A Insights in CW-Forty-One and Forty-Two.

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

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00:00:30: Welcome to the deep dive.

00:00:32: So yeah, while the headlines they often grab onto those huge deals, right?

00:00:35: The real story we're saying from professionals in weeks forty one and forty two.

00:00:39: It's actually about maturity and intense discipline.

00:00:45: It feels like the market isn't just impressed by potential anymore.

00:00:48: What gets rewarded now is, well, measurable value, real capture, and basically flawless execution.

00:00:53: Yeah, less splash, more substance.

00:00:55: Exactly.

00:00:56: Less about the big announcement, more about the structure, the nuts and bolts, and actually delivering after the deal closes.

00:01:01: I found that shift really fascinating too.

00:01:03: It's like, M&A pros are maybe a bit tired of the hype.

00:01:06: They want practical results.

00:01:07: Seems that way.

00:01:08: So today, we're going to try and distill this down.

00:01:11: Yeah.

00:01:11: Based purely on the source material you shared, we've sort of identified four key pillars of modern M&A.

00:01:17: Okay.

00:01:18: First, we'll dig into strategic execution, why that programmatic approach seems to be winning out.

00:01:23: Makes

00:01:23: sense.

00:01:24: Second, AI.

00:01:26: It's evolving so fast, isn't it, from just buzz words to, like you said, proven

00:01:31: ROI.

00:01:31: Definitely seeing

00:01:32: that.

00:01:32: Then third, we'll get into the financial side, the deal dynamics, especially revenue quality and how deals are structured now.

00:01:39: And

00:01:40: finally, the people part, the human element.

00:01:42: It sounds like it's non-negotiable for making integration actually work.

00:01:46: Okay, let's get into it.

00:01:49: So starting with strategy.

00:01:50: The big idea that kept coming up was M&A needs structure.

00:01:54: It has to be repeatable, not just chasing deals whenever they pop up.

00:01:58: It's about thinking long term, not just the next quick win.

00:02:02: Absolutely.

00:02:03: And that ties directly into this idea of programmatic M&A.

00:02:05: There's a really strong consensus around this.

00:02:07: We saw insights from Tim Mann and Bill Easton.

00:02:11: And they basically said M&A shouldn't be some side project.

00:02:15: It's got to be a core capability, mission critical even.

00:02:18: So built into the business rhythm.

00:02:19: Exactly.

00:02:21: Their point was that doing a series of smaller strategic deals over time and importantly also pruning the portfolio, selling off bits that don't fit anymore, that approach consistently delivers better shareholder returns and with less risk, much less risk than just going for one massive make or break deal.

00:02:40: That distinction, programmatic versus sporadic.

00:02:43: It really changes how leaders need to think, doesn't it?

00:02:46: Totally.

00:02:47: Max Mayant Zabrowski put it really well.

00:02:48: He challenged that short-term view, saying instead of asking, what can we save in five years, we just should be asking, what can we build in fifteen?

00:02:56: That's a powerful shift.

00:02:57: Yeah, because that long view, it stops you from... accidentally wrecking the target's culture or dismantling the very strengths you paid for.

00:03:06: And that kind of discipline, it connects directly to what's happening in the market now.

00:03:09: That renewed confidence we saw.

00:03:11: The one driving that recent US one trillion dollar M&A quarter Himanshu Singh mentioned.

00:03:16: The logic behind it is very focused.

00:03:19: It's about getting scale, grabbing market share, building a defensive position.

00:03:23: So for mid-market founders selling today, the real premium isn't just for having a good business.

00:03:30: it's if you can position yourself as the missing piece.

00:03:34: The exact fit for a bigger player's consolidation strategy.

00:03:38: Okay, so being that perfect puzzle piece, that focus on measurable value, it leads us straight into AI, doesn't it?

00:03:47: It does, because the AI story in M&A has definitely moved past just hype, the sources we looked at.

00:03:53: They're demanding hard numbers now.

00:03:54: Yeah, this is where I thought it got really interesting.

00:03:56: The conversation is shifting, like you said, from buying AI potential to buying AI proven ROI.

00:04:02: Her week springer saw this clearly.

00:04:04: Buyers aren't just impressed if you say you're AI enabled.

00:04:07: No, not anymore.

00:04:07: The premium now.

00:04:09: It's for results you can actually measure.

00:04:10: Things you can plug into a spreadsheet.

00:04:12: Like, we cut customer service costs by thirty percent using AI.

00:04:16: Or, we onboard employees twice as fast now.

00:04:18: Tangible results.

00:04:20: Exactly.

00:04:20: It has to be profitable proven.

00:04:22: not just theoretically possible.

00:04:25: And that same demand for measurable results, it applies to using AI inside the deal process too for sourcing, reviewing documents, speeding up diligence.

00:04:34: Makes

00:04:34: sense.

00:04:34: But practitioners want controls.

00:04:37: The sources were pretty clear.

00:04:38: You can't just plug in any tool.

00:04:40: Choosing the AI model, the tools, that's a serious design decision.

00:04:45: You need systems you can trust that work at scale.

00:04:48: So things like retrieval tactics, how the agents work, auditability, they're becoming crucial, you have to be able to rely on the output.

00:04:56: But even with all that machine power, you still need the human touch to make sense of it all.

00:05:01: Oh, absolutely.

00:05:02: Greg Head emphasized this.

00:05:03: He said AI won't replace deal makers.

00:05:06: Okay.

00:05:06: It'll make them unstockable.

00:05:07: The AI does the heavy lifting, churning through documents, checking balance sheets.

00:05:11: The

00:05:11: grunt work.

00:05:12: Yeah.

00:05:12: But the human stuff.

00:05:14: Reading the room.

00:05:15: building trust, negotiating the tricky bits, figuring out if the leadership team is actually any good.

00:05:20: AI can't do that.

00:05:21: Still fundamentally human skills.

00:05:23: Exactly.

00:05:24: And we saw that optimism in a survey Coon Van Engelen mentioned, something like seventy percent of M&A pros think AI will actually increase their value.

00:05:33: Interesting.

00:05:34: So they see it as augmentation, not replacement.

00:05:36: Precisely.

00:05:37: They seem ready to shift towards those higher level judgment calls.

00:05:40: Okay, so that discipline, that focus on measurable results, it feeds right into valuation, doesn't it?

00:05:46: Directly.

00:05:47: Let's shift gears then.

00:05:48: Let's talk about the financial side, the structure.

00:05:50: In this selective market, what really drives the numbers, it sounds like the quality of what you're buying has to be crystal clear from day one.

00:05:58: Absolutely.

00:05:58: And Mary Joyce broke this down really well.

00:06:00: Her point was, Not all revenue is the same.

00:06:03: Right.

00:06:04: Quality matters.

00:06:04: Hugely.

00:06:05: Pure recurring revenue.

00:06:07: think true sauce models.

00:06:08: that's like gold.

00:06:09: It signals lower risk, stable cash flow.

00:06:12: Buyers love it.

00:06:13: Commands premium multiples instantly.

00:06:15: And the flip side.

00:06:16: Well, things like contingent revenue, where you only get paid if certain milestones are hit.

00:06:20: Risky.

00:06:21: Yeah.

00:06:22: Or project-based professional services revenue.

00:06:24: That's seen as risky or too.

00:06:26: Often needs more spending to maintain, so it gets discounted sometimes heavily.

00:06:31: Buyers are just laser focused on making sure revenue won't just, you know, vanish after the deal closes.

00:06:36: So if you don't have that pure premium sauce revenue, how do buyers manage the risk?

00:06:42: What are the mechanisms?

00:06:44: It really comes down to deal structure Scott Weibull pointed out especially in the lower middle market structure is how you bridge those valuation gaps.

00:06:52: We're seeing roughly thirty percent of deals now include things like earnouts or seller notes

00:06:57: So performance based payments

00:06:59: exactly and rollovers where the seller keeps a significant chunk of equity.

00:07:03: They're averaging, get this, twenty to forty percent of the total deal value.

00:07:07: Wow, that's high.

00:07:08: It is.

00:07:08: It means the seller's own payout is really tied to how well things go after the deal closes.

00:07:14: That demands a huge amount of confidence.

00:07:16: Confidence in the buyer, confidence in the integration plan.

00:07:19: And that confidence, it has to be built on transparency, right?

00:07:23: That came through loud and clear.

00:07:24: Oh, non-negotiable.

00:07:26: Philip Herman shared a pretty stark story.

00:07:28: He actually advised a client to walk away from what looked like a good deal.

00:07:33: Why?

00:07:33: Simply because the target company got cagey during financial due diligence.

00:07:38: They weren't being upfront about some historical projects with low margins.

00:07:42: That lack of transparency, that was the deal breaker, didn't matter what the future potential looked like.

00:07:48: It's just a massive red flag if the numbers aren't clear.

00:07:50: Yeah, you can see why.

00:07:52: Though on the other side of the coin, Andrea Monticelli mentioned how tools like tax insurance are being used more now.

00:07:57: Okay.

00:07:58: not just to cover risk, but actually to increase deal certainty.

00:08:02: By sort of underwriting specific complex tax issues upfront, it helps everyone move forward with more confidence

00:08:09: faster.

00:08:09: Interesting.

00:08:10: Sort of de-risking specific points.

00:08:12: Exactly.

00:08:13: Okay, so we've covered strategy, AI, financials, but now we get to maybe the toughest

00:08:19: part.

00:08:19: The people.

00:08:20: The human element.

00:08:21: Yeah.

00:08:21: The consensus here is just unwavering.

00:08:23: It's the most challenging part, but also the most critical factor for M&A success or failure.

00:08:29: And usually the challenge starts with culture, all right?

00:08:32: Almost always.

00:08:33: Price Pritchett noted that corporate culture is this incredibly powerful force.

00:08:38: It's not easy to change.

00:08:40: And if the cultures don't mesh... The deal is in trouble from day one.

00:08:45: Dr.

00:08:45: Dieter Velzman backed this up with a pretty sobering statistic.

00:08:48: Nearly half of employees might leave within the first year after a deal closes.

00:08:52: Half?

00:08:53: Wow.

00:08:54: Yeah, often just because the cultures clash.

00:08:55: That's a staggering amount of turnover.

00:08:58: It really proves culture isn't just some soft fuzzy thing on a checklist.

00:09:01: Oh, it's

00:09:01: core value walking out the door.

00:09:03: Absolutely.

00:09:03: If you risk losing half your talent, you've basically destroyed a huge chunk of the deal value you just paid for.

00:09:10: So planning for retention.

00:09:11: is key.

00:09:12: Has

00:09:12: to be.

00:09:13: Dominic Graham noted that your strategic plan must explicitly include solid plans for retaining talent and maybe even reskilling people right from the very start.

00:09:22: Otherwise, any promised synergies are just theoretical.

00:09:26: And who leads that?

00:09:27: integration effort matters hugely too, doesn't it?

00:09:29: Immensely, Dan Leyland made a really short point here.

00:09:32: He said, the number one reason integrations fail.

00:09:35: The integration director or program director, whatever you call them, isn't brought in early enough.

00:09:40: They come in too late.

00:09:41: Exactly.

00:09:43: Their job is vital.

00:09:44: They're the link between the high-level strategy, the detailed planning, and actually making things happen on day one and beyond.

00:09:50: If they arrive after key decisions are already made, the foundation might already be correct.

00:09:55: So how do the best teams manage that complexity?

00:09:59: While Elixir Chevalier added a good perspective on this, the really effective M&A teams, they track integration maturity,

00:10:06: meaning

00:10:07: they look beyond just hitting milestones on a project plan.

00:10:10: They assess things like governance, the rhythm of communication, how well the teams are building capability.

00:10:15: It's about building a robust, sustainable, integrated operation, not just ticking boxes.

00:10:20: That makes sense.

00:10:21: It's about the how.

00:10:22: Not just the what?

00:10:23: Right.

00:10:23: And that focus on process, on discipline, it needs to trump ego.

00:10:27: That came up too.

00:10:28: Ah,

00:10:29: ego and deals.

00:10:30: Always a risk.

00:10:31: Kisan Patel warns strongly against those ego-driven mistakes.

00:10:36: Like overpaying just to win the deal.

00:10:39: Right.

00:10:39: Or focusing so much on revenue that you ignore whether the deal even makes strategic sense anymore.

00:10:44: Yeah, losing sight of the why.

00:10:46: And Pat Linden had a warning about deadlines too.

00:10:49: Specifically, arbitrary deadlines, the kind someone imposes without really understanding the work involved.

00:10:56: We need this closed by Q three.

00:10:57: Exactly.

00:10:58: That kind of pressure without realism, it just destroys value and leads to chaos after closing.

00:11:04: You need realistic timelines.

00:11:06: Okay, so we've got discipline structure measurement in a huge focus on people.

00:11:11: Where are these discipline buyers actually putting their money right now?

00:11:14: Let's touch on some sector signals and maybe those alternative buyers that came up in weeks forty one and forty two.

00:11:20: Sure.

00:11:20: Well, on the tech side, there's definitely some caution being raised, particularly around consolidation and data stacks.

00:11:26: OK.

00:11:26: Benjamin Rogosian specifically warned about this.

00:11:29: Acquisitions like, say, the five-trend DVD merger, they can create immediate risks for customers, vendor concentration risk, meaning suddenly you're reliant on one bigger player.

00:11:38: that could lead to price hikes, maybe tools you relied on disappearing, integrations breaking.

00:11:45: even innovation slowing down, it's becoming a really critical diligence point for tech buyers and users.

00:11:51: Something to watch closely then.

00:11:52: What about other sectors?

00:11:53: We saw pockets of resilient activity.

00:11:57: Kinga Anna Schrapentier mentioned data centers in the Nordics attracting a lot of interest, both strategic buyers and platforms.

00:12:04: They're seen as almost utility-like assets offering stability.

00:12:08: Okay.

00:12:08: And Montessor-Dawas highlighted regional bank deals.

00:12:11: The focus there is intensely on on getting the integration right, managing different cultures, different legacy IT systems, huge challenge.

00:12:19: Yeah, bank integrations are notoriously tricky.

00:12:21: Definitely.

00:12:22: And in energy transition M&A, Milo Miliseviliovich observed a pivot.

00:12:26: Less focus on just buying assets, more towards chemical decarbonization tech, advanced manufacturing, related software solutions.

00:12:32: Interesting shift.

00:12:33: Yeah, and noting that foreign investors are still keen, even with policy uncertainties.

00:12:38: And one trend that seemed quite significant, especially for, say, the German middle stand or the lower middle market generally, the rise of family offices.

00:12:48: Oh,

00:12:49: huge trend.

00:12:50: Tuluhan or Demi and Taylor Perry both highlighted this.

00:12:54: Family offices are increasingly seen as really attractive buyers, sometimes the most attractive option for founders looking to exit.

00:13:01: Why is that?

00:13:02: What's their advantage?

00:13:03: It really boils down to their capital.

00:13:05: It's often evergreen capital.

00:13:07: meaning long-term.

00:13:08: Very long-term.

00:13:09: They think in generations, not quarters.

00:13:11: That allows for much more flexibility in deal structures.

00:13:14: They might take minority stakes, offer creative earn-out.

00:13:17: Things

00:13:17: a typical PE fund might not.

00:13:19: Exactly.

00:13:20: And crucially, they often genuinely prioritize preserving the company's culture and legacy.

00:13:25: For a founder who built the business, that can be incredibly important, maybe more than just the absolute highest price.

00:13:31: So a different kind of partnership.

00:13:33: Very

00:13:33: different dynamic, yeah.

00:13:34: Okay, so... Bringing this all together.

00:13:38: What does it mean for you?

00:13:40: Listening to this deep dive.

00:13:42: We've heard this really strong consensus, right?

00:13:44: M&A's success today hinges on building lasting value.

00:13:48: That means programmatic strategy, AI that delivers measurable results, rigorous focus on revenue quality, and integrations led by people for people.

00:13:58: But here's maybe the provocative thought to leave you with.

00:14:02: If real success demands that fifteen-year vision we talked about.

00:14:06: How do you square that with the fact that maybe half the key people you need to execute that vision might leave in the first year?

00:14:11: That's the tension.

00:14:12: Yeah, that gap.

00:14:13: The critical gap between the long-term strategy and the short-term human reality of integration.

00:14:18: It feels like that continues to be the defining challenge in today's deal environment.

00:14:22: If you enjoyed this episode, new episodes drop every two weeks.

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00:14:30: Thank you for joining us for this deep dive.

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