Five Ways COVID Forever Changed How Deals Will Get Done

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Five Ways COVID Forever Changed How Deals Will Get Done
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The jury is still out on the fate of the handshake agreement at the front end of a deal or the propriety of packing the whole team into a private dining room for a closing dinner on the back end, but there are some aspects of deal execution that are certain to change as a result of the pandemic. Many of the changes center around the use of technology in innovative ways as deal professionals incorporated new tools into their workflow and adapted to working remotely.

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Q1 2021 hedge fund letters, conferences and more

How Deals Will Geet Done Post-Covid

Here are five changes we believe are going to stick well beyond the reopening of the economy:

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  1. One-to-many diligence

Historically, due diligence was a siloed affair. Sellers generally fielded inquiries serially from buyers or prospective buyers, often going through the same information over and over with different suitors (or most frustratingly, with different functional areas of the same organization after the LOI is signed). Now that the technology for virtual meetings has improved drastically and everyone is a power user of Zoom, deal professionals are going to leverage the technology for efficiency, presenting to large groups—in some cases groups of rivals. "Missed the call? Let’s go to the tape!” The most clever users of screenshare technology will track usage assiduously to separate the real buyers from the tire kickers and to make sure team members are keeping up.

  1. Earlier integration -> Better execution

The great emphasis on collaboration, and a new plethora of tools to choose from, makes the concept of waiting to plan integration a thing of the past. Integration can and will begin earlier and run alongside diligence. What goes into the process; collaboration software, chat tools, and video conferencing, will improve the output; more efficient and better informed diligence, more people in the loop, and better communication (if the tools are utilized properly). The ultimate result? Better and deeper buy-in from both parties and a quicker path to the synergies and strategic opportunities that prompted the deal in the first place.

  1. Cost saving

“Let’s go back to doing things the expensive way,” said no business leader ever. Now that development teams have been exposed to the efficiencies of using collaboration tools and more efficient communications platforms, they aren’t going back to working slowly and in silos.

  1. Time saving

Project management tools applied in response to COVID compressed the timeline from LOI to close and, as is the case for cost savings, deal pros are unlikely to go back to their slower ways of getting the work done. These project management tools reduce the amount of time spent on redundant administrative work. Instead of waiting all day for one Excel tracker to be sent and one whole day (at least) of making edits and adding information, these platforms prioritize time efficiency, cutting down the time it takes to complete deals.

  1. Deal sourcing

COVID forced deal professionals to find new ways to connect and source opportunities. It remains to be seen if the deal-making conference come back, as dealmakers found new ways to connect with prospective targets virtually during the pandemic, including online networking events and even social media platforms. We know of at least one potential transaction that began with an overture on LinkedIn.

It’s fair to say the impact of COVID on deal activity was shorter-lived and more benign than many market participants feared. Frictions that arose from travel restrictions and work from home protocols were quickly dealt with and the market is emerging on the other side of the crisis with new tools and new ways of operating that will serve it well in the long term.

Article By Kison Patel, founder and CEO of M&A Science

 

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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