Preparing For M&A In An Unpredictable Market

By Merlin Piscitelli

Posted: 24th May 2012 10:37

It was the case, around five years ago, that analysts, bankers, lawyers and dealmakers were able to somewhat predict the financial markets and any potential growth or risks to growth on the horizon, even up to two or three years in advance.  Then, in 2007, the global financial crisis hit, Lehman Brothers folded and suddenly all bets were off. 
 
Now experts find it hard to predict what is going to happen from month to month, let alone from quarter to quarter and forget about year on year.   Ratings get downgraded, commodity prices fluctuate, regulation is introduced and elections take place (not even in your country) and it’s all change, again!
 
Due to globalisation and the opening-up of new markets, no company can isolate itself from the impact of these market forces.  Organisations are intertwined and interconnected inevitably, sometimes they might be connected through convoluted routes, but even if it’s just through the hardware they have to buy to keep their IT systems running, or the fuel they have to put in their company cars, they are connected to the global markets, and its ups and downs. 
 
Because no company is an island, the only thing that can be predicted currently is more change and the way to deal with that change is to be prepared.  This means preparing for opportunities and for any eventualities in the best way possible.
 
Any organisation looking to sell an asset, to raise capital, or to make an acquisition in this volatile economic environment has to be prepared to move at lightening-speed.  This isn’t just because it’s important for the health and wealth of their business to close deals quickly and efficiently anymore.  Now speed is of the essence because markets will change, the ground will shift and the opportunity may be lost forever as a result.  Who, for example, can predict the impact that the crisis in Greece will have on the Euro, what affect the new French President will have on the European economy, or what event may unfold from “left field” to influence the markets next?
 
When a company is ready to sell an asset they must be ready to go to market there and then, able to promote and present their investment opportunity with all the information to hand that will be necessary for buyers to complete due diligence and make a decision.   Once potential buyers are engaged in a sale process, the final decision can be a long time coming (especially in this risk-adverse, cautious investment environment), but at least interest will have been secured, connections made and relationships built, which will definitely assist in the successful outcome of a transaction.
 
One way of ensuring market-readiness is to have a pre-prepared and pre-populated virtual data room (VDR) that’s accessible to an unlimited buying audience, from anywhere in the world.   A VDR can enable firms to instantly react to the ups and downs of the global economy and to capitalise on the windows of opportunity this opens – but because these windows may be small, it’s vital not to miss out.
 
The need for agility; to be nimble and react to opportunities is particularly important in the sale of distressed assets.  An established VDR can facilitate a sale process, or support in raising capital, fast.  Merrill DataSite recently worked with a business in this situation; a high yield bond was being raised and information assembled from three different locations, the advisors of the company in question were able to prepare their prospectus and publish it through their VDR within hours.  However, if this process had taken longer or begun three weeks later the transaction wouldn’t have been able to get underway, because of the subsequent changes in European market conditions.
 
The unpredictability inherent in the global economy, as it stands, isn’t always a bad thing for the M&A market either.  For those with the will and the money to buy, there is a wealth of options available and the key is targeting the right ones.  This means that the need for speed isn’t pertinent to the M&A sell-side only, increasingly VDR projects are being established by buy-side teams who are willing to pay for the cost of the VDR setup within a target organisation, just to ensure they have the time and opportunity to perform thorough due diligence.  
 
Now that it is so difficult to forecast what is going to unfold across the world’s economies from one month to the next, even for the most seasoned of experts, all that dealmakers, investors, advisors and companies can do is prepare to weather the storm.  There are risks and there will be exposure on all sides when it comes to putting M&A transactions together, raising funds, selling an asset or even just operating in such an interconnected but unpredictable global market.  But, where there are risks, there are also opportunities and the secret is to be prepared, ready to seize that opportunity when it does arise, before it ebbs away again, potentially forever. 
 
Merlin Piscitelli, Director, Merrill DataSite, International.

Merlin started his career in 1997 with an executive search firm in Los Angeles after graduating from Florida State University.  From 2003 to 2006, he worked as a Business development professional for Infotrieve Inc., an information management services company in New York. He spearheaded the sales operations of an internal business unit at Infotrieve and grew the business by over 160percent.


Merlin joined Merrill DataSite in 2006 to help lead the International sales effort operating from London, the European headquarters. Since then, the International DataSite business has grown at a robust rate. Merlin has personally facilitated virtual data rooms to execute more than 1,700 online due diligence projects. He has also developed a wide client base in the U.K., Russia, the CIS Region, Spain, India, South Africa and the Nordic region.  Merlin can be contacted at +44 (0)207 422 6266 or by email at Merlin.Piscitelli@merrillcorp.com


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