Technology is increasingly playing a bigger role in M&A deals, transforming the way transactions are priced, negotiated and completed. The use of different platforms is facilitating transmission of deal information to a wider group, and as a result, crucial stages in a deal can now be done remotely and simultaneously by several deal parties.
Moving away from broad auctions
Mergermarket released a survey-study on M&A deal process finding that sell-side deal-sourcing has been moving away from broad auctions. Rather, negotiated sales are becoming the deal-sourcing method of choice.
The move towards negotiated sales is partially driven by the important role of the M&A advisors who are increasingly involved in the sale process. A negotiated sale often results in a favourable price for the sale-side client. Generally, negotiated sales are more discrete, allow for sellers to maximize the price without having to entertain multiple offers, and facilitate relationship-building with synergistic buyers in particular. This development is supported by technology, as the use of big data and virtual data rooms facilitate diligence on the target. A higher level of information allows for targeted negotiations rather than the mere abundance of offers to drive the price.
Rise in unsolicited bids
According to the survey results, almost three quarters of the respondents stated that they sold a company to an unsolicited buyer over the past five years. In 2016, unsolicited bids accounted for almost $400 billion of global deal value – the most prominent transaction being German drug and crop chemical manufacturer Bayer's US$66bn bid for US seed company Monsato, which closed in February 2017. Our clients advise that alternative strategies such as unsolicited bidding have proven to be accretive and attractive to buyers due to relative anonymity. Technology is again a key driver, as more data about a target allow a potential buyer to make informed decisions even without solicitation.
Extending periods from decision to sell to settling on buyer
Despite the increase in unsolicited bids and a preference for negotiated sales, nearly half of the respondents said that the period of time between deciding to sell and settling on a buyer increased over the past five years. The extended negotiation period can be explained by regulatory delays, more complex strategy and the existence of a wider pool of potential buyers.
How to find the appropriate buyer
There has been a lot of hype around the use of online and mobile deal-sourcing platforms as they keep the sellers and the buyers updated about the real-time opportunities and facilitate effective negotiations. This has reduced the amount of face-to-face meetings.
The author would like to thank Hugo Margoc, Articling Student, for his assistance in preparing this legal update.
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