How the crisis has brought M&A’s digital future closer

May 19, 2022 | Case Study

How the crisis has brought M&A’s digital future closer

Scott Adelson, Co-President Los Angeles

Based in Los Angeles, California, Houlihan Lokey is a leading global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation.

“Mid-market deal activity tends to fluctuate far less and while dealmaking is certainly more difficult for deals with of value of $1bn or less, the drop is far less dramatic than at the top end of the market,” says Scott Adelson, co-president of Houlihan Lokey, a Los Angeles headquartered, global investment bank.

Changing the Rules of Engagement

For those acquirers still pressing ahead with deals, the coronavirus outbreak has not just slowed down the pace of M&A activity, it has changed the rules of engagement.

With the majority of M&A and corporate professionals working from the home, dealmakers have become more reliant than ever on technology to stay connected and negotiate deals, to some extent giving a glimpse of what the future of dealmaking may look like. “Virtual meeting spaces are the new norm,” says Adelson.

Video conferencing is not new, but what’s changed is an acceptance by bankers that in times of crisis it can provide a substitute to face-to-face negotiation. The willingness to accept methods that would have been unthought of a few months ago, is down to the fact that all firms are adapting at the same time, so there is no first mover disadvantage in adapting new technology. “This is a shared global experience and people want to keep working,” says Adelson.

This way of working is more efficient, and clients want to keep in contact with their regular advisors. “It’s not as good as a face-to-face meeting, but it is not that bad either,” says Adelson. “It likely will raise the bar in terms of the need to travel to a client in the future. Where we have encountered problems on deals, it has not been due to technology.”

The Return of Dealmaking

When dealmaking returns, the ability to conduct comprehensive due diligence will be more relevant than ever; companies will need to add an extra dimension to their due diligence process to analyze deals for coronavirus risk, depending on the sector in which they operate.

The crisis has increased automation in the M&A process, the question is whether it marks a permanent shift when dealmaking recovers and provides a catalyst for technological innovation in the M&A process.

Bankers have realized unforeseen efficiencies in the current environment, but Adelson does not envision an end to the role of the trusted adviser just yet. “Technology is a valuable building block in the M&A process but so far we have not seen a fintech solution that can replace the bespoke role of the advisor.”