Earlier this year, we
reviewed Deloitte and Touche LLP's
survey of M&A trends (the Survey), which
predicted that the year would match or exceed deal volume as
compared to 2015. Deloitte recently published
an article (the Article) which delves deeper
into its Survey results from mid-sized companies, concluding that
this demographic of the corporate world should be looking to
implement more disciplined measures in deal-making.
The Survey polled approximately 1,800 companies, of which half
comprised of mid-sized companies. These companies' responses
indicate that they are more concerned than their large-cap
counterparts with "obtaining bargain-priced assets".
Mid-sized companies' responses also highlight a higher rate of
disappointment post-consummation of transactions.
The Article notes that while deal activity has remained
relatively flat thus far in 2016, valuations for mid-market
transactions have remained high. In this context of lofty
valuations and scarce targets, the Article focuses on discipline in
deals as a factor of critical importance. Of approximately 78% of
the total companies canvassed in the Survey, it was noted that
insufficient due diligence with respect to targets was a key
barrier to success in M&A transactions.
Deloitte suggests practical steps that should be taken by
mid-market companies in order to improve diligence and efficiencies
on both the buy-side and sell-side. For acquisitive companies, the
maintenance of a list which points out potential targets and bottom
line strategies to adopt once the said targets become available
would be a good start. Such a list would improve reaction times and
In addition, the Article suggests that one of the main reasons
why mid-market companies facing either side of the buy-sell coin
consider that they are not ready to complete M&A transactions
is because they may not be equipped to maintain a permanent,
internal deal team. Companies should proactively build a team of
trusted legal and financial advisors to engage in a variety of
tasks from monitoring deal valuations in the industry to evaluating
potential targets. A continuous flow of information about M&A
activity, valuation trends and financing options in a company's
sector is key.
While pricing and valuation are typically the most significant
factors in any M&A transaction, companies should ensure that a
comprehensive process is implemented in the deal-making process in
order to enhance deal results: Does the transaction meet strategic
goals? Can the parties easily integrate culturally? Does it make
The author would like to thank Vincent Belley, articling
student, for his assistance in preparing this legal
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