As we have moved out of a COVID-induced economic holding pattern, PE firms are contributing significantly to overall M&A deal acceleration volume. Sponsor-backed transactions comprised 26% of overall M&A activity in 2020, the highest proportion since before the global financial crisis. With the cost of capital at an all-time low, it is particularly important that dry powder is used efficiently by quickly identifying attractive targets and accelerating deals.
It is also important to remember that value creation in M&A is as much about cost reduction as income generation. Depending upon the size and complexity of a transaction, acquisition-related costs can add another 10% to 15% or more to the actual dollar cost of the transaction. Agile acquisition is contingent on conducting due diligence in an expeditious matter: To accomplish this, industry expertise is particularly important, as intuition allows for the quicker development of hypotheses to refine investment theses. Accelerating the transition of deals will also allow PE firms to realized value sooner.
M&A Deal Acceleration with an Industry Specific Commercial Due Diligence Consulting Partner
With industry expertise in CPG, Retail, and Life Sciences, Clarkston Consulting can assist PE firms in moving through comprehensive commercial due diligence (CDD) exercises in five key areas:
- Company: Organizational capabilities and needs, commercial assets (e.g. patents, brands), business strategy and plan, revenue and cost synergies
- Products and services: Features, pricing, substitutes, value proposition, revenue model
- Customers: Segments and mix trends, voice of customer (VoC), satisfaction and net promoter scores (NPS), churn, engagement model
- Competition: Competitor list, market share estimates, M&A, partnerships, funding, strategic positioning
- Market: Size and growth, structure, trends, events, value chain, segmentation, adjacencies
Insights derived from commercial due diligence support engagements will improve the quality of acquirer’s investment strategy by:
- Deal attractiveness: will guide the ‘go/no go’ acquisition decision for an target acquisition
- Deal size: will validate, or inform negotiations regarding, key assumptions for target valuation and/or offer price
- Deal contract terms: will support the identification and prioritization of warranties and indemnities throughout the negotiation and contracting process with an acquisition target
- Post deal implementation: will refine the post-acquisition implementation plan and strategy for an acquisition target
Clarkston would love to partner with your organization on M&A deal acceleration. Our commercial due diligence consulting team leverage our industry expertise in the consumer products, life sciences, and retail industries to help our clients maximize their profitability and increase the likelihood of deal success.
Subscribe to Clarkston's Insights
Contributions by Ingrid Herman