Best of LinkedIn: M&A Insights CW 03/ 04

00:00:00: Provided by Thomas Allgaier and Frennus, based on the most relevant posts on LinkedIn about M&A insights from CW-O-three and O-four, Frennus is a B-to-B market research company supporting M&A consultancies with the market and competition perspective, for example, in commercial due diligence.

00:00:18: Welcome back to the deep dive.

00:00:19: We've spent the last few days combing through all the noise on LinkedIn to really pull out the signal for M&A trends.

00:00:26: This is for weeks three and four of twenty twenty six.

00:00:29: And the signal is surprisingly loud this time around.

00:00:32: I mean, if you just looked at the headlines, you'd think we were in another boom.

00:00:35: Alistair Machette pointed out that Goldman Sachs alone advised on thirty-eight mega-deals.

00:00:40: Yeah, I saw that.

00:00:41: Thirty-eight.

00:00:41: That's a massive volume of activity.

00:00:43: It is.

00:00:44: But the texture feels different.

00:00:46: It is different.

00:00:47: It's not that... You know, wild speculative frenzy we saw a few years back.

00:00:50: The real theme emerging isn't growth at all costs.

00:00:53: No.

00:00:53: It's discipline.

00:00:54: Exactly.

00:00:55: It feels like the market has sobered up a bit.

00:00:57: We're seeing all this rigorous discussion around deal mechanics, preparation, and, interestingly, a real human focus on what happens after the ink is dry.

00:01:06: Right.

00:01:06: So we basically clustered this into three themes for today.

00:01:09: First, deal discipline itself.

00:01:11: Then, preparation and strategy, how you source deals.

00:01:14: And finally, the one that always gets overlooked.

00:01:17: people and culture.

00:01:19: Plus, we have to touch on some huge sector shifts.

00:01:22: I mean, what's happening in fintech and biotech?

00:01:25: It paints a very clear picture of where the money is actually moving.

00:01:28: It does.

00:01:29: And that really explains why all this discipline is so necessary.

00:01:33: But let's start where the rubber meets the road.

00:01:37: Deal discipline.

00:01:38: Right.

00:01:38: And you can't get more fundamental than this quote from Bill Monroe.

00:01:42: I feel like every dealmaker knows it, but they forget it.

00:01:44: He just said, Time kills all deals.

00:01:47: It's the oldest rule in the book, isn't it?

00:01:49: The fact he felt the need to post it again tells you people are still getting it wrong.

00:01:53: So his point is that motivation, it's a perishable resource.

00:01:56: It is.

00:01:56: You have this peak momentum right when the commercial terms are agreed.

00:01:59: If you let that bleed away while lawyers fight over syntax, you're just inviting disaster.

00:02:06: It's that classic fight, isn't it?

00:02:07: Commercial intent versus legal protection.

00:02:11: Monroe's advice seems so obvious.

00:02:14: Agree on the commercials upfront, lock them down, then let the lawyers in.

00:02:18: Obvious.

00:02:19: But it rarely happens.

00:02:21: And the legal review just reopens the commercial points.

00:02:24: And that's where the deal dies.

00:02:26: It's not just speed, it's about signaling.

00:02:28: Yes.

00:02:28: Which brings us to one of the best tactical anecdotes I've seen in a while.

00:02:33: From David Edgar.

00:02:35: The luggage tactic.

00:02:36: I loved this.

00:02:37: It's such a simple... psychological power move.

00:02:41: It really is.

00:02:41: So for anyone who missed it, he basically says, you should never bring your bags to the negotiation room.

00:02:46: Because luggage is a clock.

00:02:48: Exactly.

00:02:49: If I see your suitcase, I know you have a flight to catch at six p.m.

00:02:52: I know your deadline.

00:02:53: So I'm just gonna stall.

00:02:54: I'll wait until five fifteen to bring up the really tough points knowing you'll probably just cave to make your flight.

00:02:59: It hands all the leverage to the other side.

00:03:01: Edgar told the story where he did this.

00:03:04: He deliberately left his bags at the hotel.

00:03:06: So he looked like he had nowhere to be.

00:03:08: Right.

00:03:08: And he forced a late night session.

00:03:11: The punchline was that the lawyers were furious because they missed dinner, but their CEO just wanted it done.

00:03:17: He forced the close by removing that signal of time pressure.

00:03:21: A great reminder that negotiation is as much theater as it is finance.

00:03:25: Speaking of finance, we should talk about earnouts.

00:03:28: Because, you know, if you're a seller right now, the data suggests you should probably run the other way.

00:03:33: Yeah, Adam Johannen had a pretty grim take on this, especially in the lower middle market.

00:03:37: It stood out to me because earnouts are always pitched as the solution, right?

00:03:42: The bridge between what a buyer and seller think a company is worth.

00:03:46: But Johannen is saying that bridge is collapsing.

00:03:48: It's collapsing because of control.

00:03:50: His whole argument is that sellers are realizing they just rarely get paid.

00:03:56: Once you sell, the buyer has the keys.

00:03:58: They control the accounting, the strategy, the costs.

00:04:01: And It is incredibly easy for them to legally massage the P&L to make sure those earn-out targets get missed.

00:04:08: A bit of strategic cost reallocation.

00:04:10: You could call it that.

00:04:12: But the real insight here is that sellers are getting wise to it.

00:04:16: They're trading a higher valuation for certainty.

00:04:19: They'd rather take a lower guaranteed cash payment at close.

00:04:22: Then

00:04:22: a lottery ticket three years from now.

00:04:24: Exactly.

00:04:25: And that desire for real, tangible cash brings us straight to EBITDA.

00:04:31: Professor Joe Omahoney raised a really important point about the quality of EBITDA.

00:04:34: Right.

00:04:35: Not all EBITDA is created equal.

00:04:37: It's a critical distinction.

00:04:39: You can have great EBITDA on paper, but if that profit isn't accessible, if it's not converting to cash,

00:04:44: it's not that valuable.

00:04:46: Oh, Mahoney says, the key metric now is cash conversion.

00:04:49: What actually lands in the bank after tax, VAT, everything else?

00:04:53: And he gave a specific number.

00:04:54: He said, greater than ninety percent cash conversion is the new gold standard.

00:04:58: Which is a high bar.

00:04:59: It is.

00:05:00: But it reflects the cost of capital.

00:05:01: Buyers need cash flow to service the debt they just used to buy you.

00:05:05: And on top of that, Alistair Robertson added another layer about adjusted EBITDA.

00:05:09: Oh, the adjusted game.

00:05:10: If we ignore all the bad stuff, we made a fortune.

00:05:13: Robertson's warning is that it's getting out of hand.

00:05:16: You can't adjust for everything.

00:05:17: You lose credibility.

00:05:18: Adjustments are for exceptional items.

00:05:20: A lawsuit.

00:05:21: A one-off restructuring.

00:05:23: Not normal trading costs.

00:05:25: If a buyer sees adjusted EBITDA is double the actual profit, they don't see potential.

00:05:31: They see fake numbers.

00:05:32: It's just a road's trust.

00:05:34: But there is one area where you can find real hidden value.

00:05:38: Mert Erkin pointed out that supply chain synergies are often completely overlooked.

00:05:42: And he said they can drive up to thirty five percent EBITDA growth.

00:05:46: Which is huge.

00:05:47: Deal teams always focus on sales synergies, you know, cross-selling, but procurement and supply chain efficiencies.

00:05:54: Those are tangible.

00:05:55: That drops straight to the bottom line.

00:05:56: Much safer bet.

00:05:57: Okay, so let's shift gears.

00:05:58: Preparation and strategy.

00:06:00: If you're a buyer, how are you finding targets in this disciplined market?

00:06:03: Well, Patrick Bauer compares to defining a needle in a haystack.

00:06:06: He makes a key distinction.

00:06:09: The bottleneck isn't money.

00:06:10: There's plenty in dry powder out there.

00:06:12: The bottleneck is visibility.

00:06:14: It's finding that target before everyone else does.

00:06:17: So Bauer argues for structure and signals.

00:06:20: You have to monitor for triggers, hiring waves, new products.

00:06:24: So it's about proactive sourcing, not just reactive bidding when a company hits the market.

00:06:29: Exactly.

00:06:30: Which is a point Kisan Patel also made.

00:06:32: He says M&A shouldn't be a break glass in case of emergency move.

00:06:36: The

00:06:36: growth panic trap.

00:06:38: Right.

00:06:38: Your organic growth stalls, the board panics and says, go buy something.

00:06:43: Patel warns that's the worst time to buy.

00:06:45: You're just patching a hole, not executing a strategy.

00:06:48: And from the seller side, if you do decide to sell, indecision is just lethal.

00:06:51: Alice in Dent had a strong warning about on-again, off-again deals.

00:06:55: Well, we see this all the time.

00:06:57: A founder tests the market, gets cold feet, pauses.

00:06:59: And she says value doesn't pause.

00:07:01: It rots.

00:07:02: Buyers lose conviction.

00:07:03: They assume something's wrong.

00:07:04: Right.

00:07:04: And sticking with the process, George S. Markakis had a very tactical piece of advice for the data room.

00:07:10: He calls it this staged approach.

00:07:12: This seems like basic risk management, but so many sellers ignore it.

00:07:16: They do.

00:07:16: In their eagerness, they go open Kimono on day one.

00:07:20: They put their entire customer list, contact snull, in the data room before an LOI is even signed.

00:07:26: So if the deal falls through, you've just handed your competitor your client list.

00:07:30: Exactly.

00:07:31: And it gives them leverage to retrade you later to drop the price.

00:07:35: His advice is simple.

00:07:36: Hold back the crown jewels until the very last stage.

00:07:40: Speaking of secrets, Alfred D. Nader's post on the signs your company is being sold was

00:07:44: hilarious.

00:07:45: Painfully accurate.

00:07:46: The one that got me was nonsensical hires.

00:07:50: Suddenly you're filling empty boxes on the org chart just to look complete for a buyer.

00:07:54: Or the sudden... Urgent request from finance for five years of historical data that no one has ever cared about before.

00:08:01: And the calendar invites all those private meetings.

00:08:04: Strategic review, yeah.

00:08:05: If you see those, you're being sold, which actually segues perfectly into our third theme, people and culture.

00:08:13: Because while the execs are in their strategic review, the staff is going through what David Lansfield calls organizational grief.

00:08:19: Grief is a strong word, but when you read his analysis, it's the right one.

00:08:23: It makes sense.

00:08:24: Employees are mourning the loss of the future they had imagined for themselves at that company.

00:08:29: And it's not just an emotional issue.

00:08:31: It's a productivity one.

00:08:33: He says productivity can drop by twenty-five to thirty percent during that grieving period.

00:08:38: That's value being destroyed in real time.

00:08:42: And it's not just the junior staff.

00:08:44: Anirvan Sen pointed out that leadership exits often happen for the wrong reasons.

00:08:48: The misinterpreted signal problem.

00:08:51: Senior leaders hear rumors, or they just get silence from the acquirer, and they assume the worst.

00:08:56: So they resign.

00:08:57: They resigned before the deal even closes.

00:08:59: But the tragedy is, the buyer often wanted them.

00:09:02: They were part of the investment thesis.

00:09:04: The communication just failed.

00:09:05: So how do you

00:09:06: fix that?

00:09:07: Thomas H. Kessler suggests looking beyond the C-suite.

00:09:10: He says the key is the extended leadership team.

00:09:13: The ELT, yes.

00:09:14: VPs, directors, country heads.

00:09:17: the people who actually run the company.

00:09:18: And his point is that most integrations fail because the ELT is just briefed on a plan.

00:09:23: They aren't part of creating it.

00:09:25: Right.

00:09:25: Briefings create compliance, co-creation creates ownership.

00:09:29: If they feel like it's their integration, it works.

00:09:32: And before we move on, Frank Akila had a great piece of advice for everyone listening.

00:09:37: Treat your career like a deal.

00:09:39: I really like this framing.

00:09:41: We do so much due diligence on companies, but when we change jobs, we often just look at the salary bump.

00:09:46: The premium.

00:09:47: Akila's advice is to do full DD on your own career moves.

00:09:51: Check the culture fit, the integration risk.

00:09:54: Sage advice.

00:09:56: Okay, let's hit these sector shifts because some of these are massive signals.

00:10:00: Let's start with FinTech.

00:10:02: The headline here is Capital One acquiring Brex for five point one five billion dollars.

00:10:08: Sam Bowie have flagged this.

00:10:10: It feels like a watershed moment, doesn't it?

00:10:12: The whole narrative was that FinTechs were going to kill the big banks.

00:10:14: And now a big bank is buying one of the biggest disruptors.

00:10:17: It's the maturation of the cycle.

00:10:19: The banks realize they can't innovate that fast internally.

00:10:23: So

00:10:23: they're using their balance sheet to buy modernization.

00:10:26: The disruptors are becoming the R&D departments for the incumbents.

00:10:28: We're

00:10:29: seeing a similar buying the future trend in tech more broadly.

00:10:32: Nicholas Babin talked about a shift from buying structures to buying intelligence.

00:10:37: It's the evolution.

00:10:38: they acquire higher.

00:10:39: Companies aren't buying revenue.

00:10:41: They're buying algorithms, data sets, machine learning teams.

00:10:44: The value is in the IP.

00:10:45: And Hurwigsbringer backs this up for software saying buyers pay for roadmap

00:10:50: fit.

00:10:50: It's the build versus buy calculation.

00:10:53: If a startup plugs a hole in your product roadmap, they're worth a premium because they save you eighteen months of development time.

00:11:01: You're buying speed.

00:11:02: And finally, in biotech, Dr.

00:11:05: Yenpo Chin had a fascinating take on deal timelines.

00:11:09: He says it's all about conviction.

00:11:11: This was a really nuanced point.

00:11:13: In pharma, you can't rush a deal.

00:11:15: The buyer needs months to build scientific conviction that a drug actually works.

00:11:20: But the paradox is, once they have that conviction, the deal closes in days.

00:11:24: Right.

00:11:25: So as a seller, you can't run a normal auction.

00:11:27: You have to nurture that conviction over time.

00:11:30: The winner isn't the highest bidder.

00:11:32: It's the one who achieved conviction first.

00:11:34: It

00:11:34: all comes back to that central theme, doesn't it?

00:11:36: Discipline.

00:11:36: That's

00:11:37: the verdict from the market for early twenty-twenty-six.

00:11:39: The discipline to wait, to verify, to integrate properly.

00:11:43: So looking ahead... What's the sentiment?

00:11:45: We heard from Daniel Friedman, Venus Kennedy, Chris Irwin.

00:11:50: Are we bullish?

00:11:51: I'd say the consensus is cautious optimism.

00:11:55: The capital is there.

00:11:56: Rates have stabilized.

00:11:58: But the party days are over.

00:11:59: Chris Irwin put it best.

00:12:00: The growth at all costs era is dead.

00:12:03: It's dead.

00:12:04: Now it's about disciplined KPIs.

00:12:06: Buyers are selective.

00:12:07: They want profitability.

00:12:08: They want logic.

00:12:09: They want real integration plans.

00:12:11: Less gambling, more chess.

00:12:13: That's

00:12:13: the mood.

00:12:14: If you enjoyed this episode, new episodes drop every two weeks.

00:12:17: Also, check out our other editions on private equity, venture capital, and strategy and consulting.

00:12:21: Thanks for listening.

00:12:22: Go subscribe so you don't miss the next deep dive into the sack.

00:12:25: See

00:12:25: you next time.