Best of LinkedIn: M&A Insights CW 19/ 20

00:00:00: Provided by Thomas Allgaier and Frenness, based on the most relevant posts on LinkedIn about M&A Insights from CW-.

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00:00:31: alright.

00:00:31: so if you're private equity or corporate development right now this deep dive definitely

00:00:37: Yeah, absolutely.

00:00:38: Our mission today is just to unpack the top M&A trends we've seen floating around across LinkedIn during calendar weeks nineteen and twenty.

00:00:45: right because I mean The market is regaining some serious momentum heading into twenty-twenty six.

00:00:50: But the actual rules of the game like how you source?

00:00:53: How you structure and how you integrate they are shifting incredibly fast

00:00:57: Fast as an understatement.

00:00:59: so let's jump right in To the loudest conversation In every single data room Right now which Is obviously artificial intelligence.

00:01:05: Oh, of course.

00:01:06: It's everywhere

00:01:07: right but we're not just talking about AI as some you know shiny new toy.

00:01:11: I want to look at Elizabeth Kasky's operational framework.

00:01:15: She kind of breaks AI down into three distinct layers for M&A.

00:01:18: Okay?

00:01:19: Like that what are the layers?

00:01:20: so layer one is internal efficiency.

00:01:22: Right doing your own diligence faster.

00:01:24: Yeah.

00:01:25: Layer two has client strategy Which is how buyers evaluate the risks of a target.

00:01:29: and layer Three The big One Is transformative like using AI to fundamentally reshape the post-deal operating model.

00:01:38: Yeah, and honestly that first layer alone is already changing the economics of M&A advisory.

00:01:43: I mean if you run a boutique advisory You are bleeding capacity on just well administrative friction such a vandermere which actually shared some crazy data.

00:01:52: What did he find?

00:01:52: He found that mid-market M&A teams are quietly leaving about six point seven million euros on the table every single year.

00:01:59: Wow!

00:01:59: Wait, Six Point Seven Million?

00:02:01: Yeah

00:02:01: and it has nothing to do with bad deals.

00:02:03: It is entirely about the friction stack.

00:02:05: you know Associates late at night trying to merge registry exports manually translating documents doing UBO check... That's

00:02:12: just a massive bottleneck.

00:02:13: Exactly Saja noted using things like Synergy AI to consolidate those workflows saves roughly one hundred twenty hours per mandate.

00:02:21: A hundred twenty hours.

00:02:23: I mean, that is a complete capacity unlock right?

00:02:25: You don't even have to add a single headcount.

00:02:27: Yeah

00:02:27: and it totally shifts the advisors value proposition like look at Joe Lewin He's building deal flow agent which is an AI native advisory firm for essential services.

00:02:37: Okay

00:02:37: what kind of services?

00:02:38: Like HVAC fire safety healthcare practices stuff in the one fifty million pound EV range?

00:02:45: By automating The mundane stuff his human advisers can just focus on judgment

00:02:50: Which is what they're actually paid for.

00:02:52: Yeah, I mean if you've sat across from a founder who's selling their life's work You know the spreadsheet is only like ten percent of the job

00:02:58: exactly

00:02:59: managing it.

00:02:59: deeply nervous owner.

00:03:01: yeah have to no one to push them on a working capital adjustment and Well when to back off so the deal doesn't just completely collapse.

00:03:08: AI can't read that room?

00:03:10: No,

00:03:10: it really can't.

00:03:11: Which kind of brings up a huge issue on the buy side like if AI is acting as this superpower junior analyst writing flawless pitch decks in seconds how do buyers actually separate the signal from the noise?

00:03:24: Yeah, Liz Yanoville talked about this exact dynamic.

00:03:26: I mean The guy has executed over six billion and cross-border deals And he says the market is just flooded with these highly polished Ai generated materials right now.

00:03:36: But when he sits in rooms with sovereign wealth funds or family offices, they don't care about the shiny deck.

00:03:41: They immediately just ask who is behind this?

00:03:44: Because human track record Is The One Filter.

00:03:46: The Algorithm Can't Fake.

00:03:48: AI can hallucinate.

00:03:49: a perfect revenue projection but Human Judgment Like A Founder Navigating The Twenty-Twenty Two Supply Chain Prices That's What Protects The Capital Right.

00:03:58: It Makes Total Sense Of Execution.

00:04:00: But The AI Impact Gets A Lot Scarier When We Move Upstream Into Corporate Strategy.

00:04:05: Scary How

00:04:06: Well, Dr.

00:04:06: Mike DeVries pointed out that AI is now pre-structuring decision spaces before the strategy team even walks into based on some black box parameters?

00:04:27: You're completely blind to what was thrown away.

00:04:29: Exactly, if the AI screened out a great target just because it didn't fit one rigid metric leadership never even knows that existed.

00:04:38: The AI is making this strategy

00:04:40: And you can see urgency in the broader market strategy too.

00:04:44: Matthew B. Borner pointed out That third of the largest M&A deals right now cite AIs as their core rationale.

00:04:50: Third That's massive.

00:04:52: Yeah,

00:04:52: and his point is that companies like Apple or Walmart aren't buying these targets because they lack the capital to build it themselves.

00:04:58: They're buying them because they lacked

00:04:59: time.

00:04:59: Right!

00:05:00: Time Is The Only Asset That Matters Right Now.

00:05:02: Jason M. Lemkin actually highlighted this.

00:05:04: with those sixty billion dollar valuation talks around cursor and tech giants.

00:05:08: Sixty

00:05:08: Billion?

00:05:09: The map sounds insane.

00:05:10: It does Until you realize when your stock is trading at a hundred turns revenues You just use that inflated currency To buy assets of ten times revenue all day long.

00:05:19: Yeah, it makes perfect sense.

00:05:20: And we see that same demand in life sciences.

00:05:24: Sebastian Lake-Scoffday Anderson noted Roche's one billion dollar deal for Path AI.

00:05:29: Okay what was the play there?

00:05:30: They weren't just buying some abstract AI concept.

00:05:33: they bought an AI system already embedded into clinical workflows.

00:05:37: It is literally a shortcut to drug development.

00:05:40: timelines

00:05:40: Got it.

00:05:41: So look A.I helps you find the deal screen at.

00:05:45: maybe write the LOI faster But once that LOI is signed, you hit the wall of reality.

00:05:50: You still have to negotiate.

00:05:56: William Vasquez Sanchez laid down the golden rule here.

00:05:59: Valuation methods like your DCF models, they don't create value They just measure it.

00:06:04: future cash generation is what actually creates The Value and right now buyers are heavily relying on the structure of the deal rather than Just a headline valuation And

00:06:12: the main structural tool.

00:06:13: everyone Is leaning on?

00:06:15: It feels Like A safe bridge for a buyer.

00:06:17: but Tula Han or Demi warn sellers that they have to vigorously challenge those mechanics early On.

00:06:22: Oh for sure.

00:06:23: The mechanics are where sellers get totally wiped out.

00:06:26: Exactly, like say a buyer offers this massive earn-out if the seller hits their original EBITDA projections Sounds fair on paper right?

00:06:35: Yeah but post close the buyers driving the car

00:06:38: Right.

00:06:39: What if the buyer overhauls the ERP system and builds those integration costs directly to the acquired units P&L?

00:06:47: The Seller's EBITTA target is just gone Coof destroyed.

00:06:51: I always think an earn out is basically like a prenuptial agreement where you still have to manage the joint bank account, You give up the steering wheel but your judged on how fast that car goes.

00:06:58: That's perfect analogy.

00:07:00: Yeah.

00:07:00: Allison Dent actually confirmed that tension.

00:07:03: She has got twenty five years of experience and she says Earnouts are entirely about co-dependence & trust.

00:07:09: Right?

00:07:09: Who controls decisions that hit those targets?

00:07:12: Exactly?

00:07:13: Taberby Benedict shared some really concrete rules for surviving these earn outs.

00:07:18: First keep it simple.

00:07:19: try to tie the payout to revenue instead of EBITDA because revenue is way harder for a buyer to manipulate.

00:07:25: Oh that's smart, what else?

00:07:27: Keep it short.

00:07:27: market median right now is about twenty four months and you have to force the buyer to run the business as a standalone unit once they blend your sales team into their corporate structure.

00:07:38: The measurement integrity

00:07:40: Yeah, which ties right into this whole illusion of founder-friendly deals.

00:07:45: Pat Linden offered a pretty stark reality check on

00:07:48: that.

00:07:48: Let me guess...Founder Friendly only exists in the pitch deck?

00:07:52: Pretty much!

00:07:52: He argues it's just marketing term….

00:07:55: Once you sign exclusivity The legal mechanics reveal truth.

00:07:59: If Founders' rollover equity is strictly tied to their continued employment like They lose shares if they get fired That isn't founder friendly always overrides the culture deck.

00:08:10: And it's not just future payouts either, It is how they measure present value.

00:08:14: Philip Fitzgerald had a great take on networking capital.

00:08:17: He says we shouldn't even call that working capital.

00:08:19: We should call it cash.

00:08:20: maybe

00:08:21: Cash

00:08:21: may be?

00:08:22: I love that.

00:08:23: Right.

00:08:23: if you're selling You see two million in accounts receivable as an asset But The buyer audits it Sees aging past ninety days and says yeah That catch never coming In.

00:08:33: They just force A downward adjustment right before closing.

00:08:36: And defending that working capital peg is crucial because it bridges you right into the most dangerous phase, The integration trap.

00:08:43: Oh day one!

00:08:45: Yeah do you normally share a terrifying stat on this?

00:08:47: Seventy percent of M&A deals fail to capture their expected synergies.

00:08:51: SeventY PERCENT!

00:08:52: and think about the current market.

00:08:53: PE hold periods are stretching to five point seven years Right now.

00:08:57: You can't rely on multiple expansion anymore.

00:09:00: If you ignore your Integration Management Office Your leaving upto twenty per cent Of your MOICs On the table.

00:09:05: Sankalp Kumar framed this perfectly.

00:09:08: He said integration isn't a strategy problem, it's a discipline problem.

00:09:11: How so?

00:09:12: You need a twelve to eighteen month operating muscle.

00:09:15: you have to define the target operating model early and run actual rigorous governance.

00:09:20: Okay but let me play devil's advocate for a second.

00:09:23: We hear governance a lot Isn't a lot of this just culture clash?

00:09:27: do we really need a massive integration office or do people just need to get along?

00:09:31: Well, Quincey Kendrick completely reframes that.

00:09:34: He points out that culture clash isn't about the abstract values in a pitch deck.

00:09:39: it's about observable behavior patterns under pressure

00:09:42: So like...the friction and daily workflow?

00:09:44: Precisely!

00:09:45: It is delayed decisions because no one knows who has budget authority or sales team freezing up cause they don't know what product bundle to sell.

00:09:53: he calls integration debt.

00:09:57: Professor Vlatka Arianna Halupik backed this up too, noting that post-close leadership alignment is the actual determinant of success.

00:10:05: How do executives make decisions in a room together?

00:10:08: And

00:10:08: stakes for that vary so much by sector.

00:10:10: Laurie Smith pointed out that in healthcare M&A trust absolutely does not transfer.

00:10:15: you can buy hospital network but physicians and nurses aren't going to blindly adopt your strategy.

00:10:20: You have deliberately rebuild that trust from scratch.

00:10:25: You know, we also have to look at the human element on the cellar side before integration even starts.

00:10:30: Rhys Tonlinson talked about founder-deal fatigue...

00:10:33: Oh yeah when they just want to walk away!

00:10:34: Right Founders often lose deals in the final stretch, and it's rarely because financials got worse.

00:10:40: It is because of immense personal pressure like a sick parent or strained

00:10:44: marriage

00:10:45: over a six-month due diligence sprint.

00:10:48: They just completely lose perspective

00:10:49: Exactly!

00:10:50: they fixate on some irrelevant indemnification clause And threaten to blow up a fifty million dollar deal.

00:10:56: You have manage human not just spreadsheet.

00:10:59: Yeah, that is so true.

00:11:01: So we've got all these internal human elements That can tank a deal.

00:11:05: but currently the external forces are reshaping The whole playing field too.

00:11:09: Oh you mean regulation and tax?

00:11:11: Yes regulators Are essentially creating artificial deadlines right now.

00:11:15: Benjamin Yeo And Nick Kampfan highlighted this in Australia.

00:11:19: What's happening there?

00:11:19: There's

00:11:20: a proposed capital games tax reform for twenty-twenty six In twenty twenty seven.

00:11:25: It might remove the fifty percent CGT discount.

00:11:28: so mid-market founders are panicking and starting sell side DD immediately to be the deadline.

00:11:33: Wow,

00:11:33: we're seeing structural maturation

00:11:35: in the Middle East too.

00:11:36: Haikalhajaji and Shish Gandhi noted that the UAE has these new merger control regulations, a corporate tax regime.

00:11:43: Right.

00:11:44: Tax used to be an afterthought there

00:11:45: Yeah but now it's core commercial structure.

00:11:47: It dictates whether you do asset deal or share deal.

00:11:50: But honestly biggest regulatory shift in tech right is Dora

00:11:55: The Digital Operational Resilience Act in Europe

00:11:57: Exactly.

00:11:58: Dami Iorio pointed out that cyber resilience is no longer just a minor box you check during IT diligence, it's actively shaping valuations and execution

00:12:07: certainty.".

00:12:08: So Dorr basically acting like an aggressive home inspector?

00:12:11: How do you mean?

00:12:12: Well before…an inspector might say hey the roof was bad but now Dorr legally forces your bank to lower mortgage value based on the exact repair cost!

00:12:24: That is spot on.

00:12:26: Buyers are finding non-compliant tech and just deducting multi million dollar remediation costs straight from the enterprise value.

00:12:33: But hey, it's not all doom & gloom.

00:12:34: On The Regulatory Front Dominic Deegan And Dr.

00:12:37: Jens Kengelback Reported Some Pretty Good News About EU's Draft Merger Guidelines.

00:12:43: The commission is actually considering scale and innovation as pro-competitive factors now.

00:12:48: Finally, they're realizing Europe needs some consolidation to build champion companies.

00:12:54: And BCG analysis suggests this could unlock over ten billion euros in annual deal activity that was just... previously blocked.

00:13:03: Which feeds perfectly into the twenty-twenty six outlook.

00:13:05: Yeah, Johannes Radle noted Goldman Sachs and Morgan Stanley are highly bullish.

00:13:09: right now you've got this mix of AI pressure PE firms needing to monetize and strong cross border flow.

00:13:16: The velocity is definitely shifting.

00:13:18: if you enjoy this episode new episodes drop every two weeks.

00:13:20: also check out our other editions on private equity venture capital and strategy in consulting.

00:13:25: Yeah, thanks so much for joining our deep dive today.

00:13:26: Make sure to subscribe.

00:13:27: but before you get back to building your models I want to leave you with one final thought.

00:13:31: let's hear it.

00:13:32: we talked about AI pre structuring deal decisions right and regulators getting way stricter on cyber resilience.

00:13:39: So what happens when an AI algorithm recommends a target?

00:13:44: Based on variables it literally can't explain to a human let alone a regulatory body?

00:13:49: Oh, wow

00:13:50: right.

00:13:50: when the invisible hand of AI strategy meets the very visible Hand of merger control who blinks first?

00:13:57: how do you explain that to your investment committee?

00:13:59: I'll leave you to mull that over.