In a post COVID-19 economy, slowly recovering from a sudden stop, investors face a significant trend of strengthened competition initiated by an abundance of funds and a contraction of targets’ profiles. This is undoubtedly has consequences on M&A projects.
Investors looking for assurance tend to favour the same kind of business models, such as those built on recurring revenues. In such a context, digital services companies and those offering software as a service (SaaS) have become central targets for private equity firms and corporate competitors. Young firms specialising in cybersecurity services, software integration, cloud computing and others linked to remote work etc. are very much in demand. For the same reasons, companies in the education and training markets have also become very attractive.
This fierce appetite for rising stars has led to increasingly complex M&A processes, where bidders must get a clear view on key opportunities and risks to be able to formulate the best price offer in a very short time. Delays are often shortened, access to basic financial information is sometimes complicated and the sky seems to be the limit with today’s EBITDA multiples.
In terms of valuation, those competitive issues have also led to new trends in terms of pricing definition. For instance, the financial net debt is today more and more often apprehended through locked-box mechanisms, supposedly more efficient for M&A actors, by offering a good way to reduce the negotiation perimeter.
From a financial consulting firm perspective this may call for a redefining of the organisation’s strategy. Indeed, it seems now more essential than ever to mobilise grey-hair forces at the beginning of the project to be able to reach top conclusions in the shortest time. This need for high experience, reactivity and efficiency in even more competitive environments has turned advisors into real partners; committed to providing the best possible assistance to ensure their clients win.
In that context where intuitu personae may become the first decision parameter, Big-four companies may no longer be in a monopolistic position. Indeed, ‘Challengers’ appear to be an alternative more than ever before. Most often born as spin-offs from Big-four teams, those young and independent advisory firms are nonetheless very attractive as they can offer high value-added services with more flexibility and adaptability as well as the guarantee of strong involvement of partners in their assignments.
Consequently, due diligence assignments tend to be tailor- made in terms of scope of work or rhythm. For example, it is now common to begin with a red flag report that will then turn into a full report only if the client enters the exclusivity period. Sometimes, the scope of work is limited to specific analysis considered as key business drivers to keep the audit work as fast as possible.
In more demanding processes, with fierce competition enhanced by the globalisation of investing activities – cross-border deals are nowadays more common – agility is key for all parties involved. Investors and their advisors are more than ever teammates, seeking a high degree of mutual confidence.
We help clients from the Benelux region who wish to acquire business in France. With a huge track record of M&A due diligences in France for foreigners especially coming from Benelux region and linked to our Partnership with a Belgian well-known independent accounting Firm, we are able to provide Benelux SME’s with comprehensive and personally tailored advice.