Process plus technology key to accelerating diligence
May 19, 2022 | Case Study
Justin Prichard, Mangaging Director Milwaukee
Baird offers Private Wealth Management, Asset Management, Investment Banking/ Capital Markets and Private Equity services with offices in the United States, Europe and Asia.
Mega-sized acquisitions may grab the headlines, but middle-market M&A is always where most of the action is irrespective of whether the deals are transacted in Europe, Asia-Pacific or the Americas.
In the thick of this activity is Milwaukee-headquartered Baird, a mid-market focused, full-service investment bank that specializes in advising companies, especially private equity firms, on M&A throughout the world. In fact, 80% of its investment banking business is working on sell-side mandates for financial sponsors globally.
The Evolution of Due Diligence
Key to the success of any deal is the due diligence that is done, and for Justin Prichard, managing director and co-head of technology, media and telecoms investment banking at Baird, the technology supporting the process has evolved in recent years, offering new capability to practitioners in areas typically labor intensive.
This includes the adoption of “natural language processing to help draft [due diligence] reports while software is used to interrogate management information systems,” says Prichard, adding that, as a result, “long-form due diligence reports” are likely to become a thing of the past.
Strikingly, he also believes that, so long as companies are comfortable with and adhere to data protection and privacy regulations, such as the EU’s General Data Protection Regulation, the industry could move towards “a point in the next five years where qualified parties could be given a log-in to a core set of company information to conduct their own interrogation on that information”.
Such access could potentially speed up the due diligence process, but that may depend to some extent on what technology could be used to run the analysis. Technology can, according to Prichard, accelerate due diligence and deal execution, provided it is part of a well-planned M&A sale process, which includes doing as much of the heavy lifting as early as possible.
“We will spend considerable time before launching the transaction working on the financial and commercial due diligence. By doing this early we can ensure that the diligence is aligned with the narrative of the sale process so there are no surprises down the line that could derail the process,” says Prichard.
Pre-Deal Due Diligence Enables Faster Execution
Baird ensures all of the financial and commercial due diligence is completed before the sale process kicks off, enabling faster execution. “The more questions we can answer for the prospective bidders in advance, the more we can retain control of the process and the timetable,” says Prichard.
Moving from first round bids to closing the deal as quickly as possible, whilst maintaining competitive tension, ensures process control remains with the seller. Baird achieved this in advising private equity firm 3i Group on the recent sale of its investment in Aspen Pumps Group to Inflexion Private Equity.
“We received first round bids on a Friday and signed the deal the following Tuesday morning,” says Prichard, adding that speed of execution was in large part down to extensive upfront due diligence preparation.
Being clear from the start keeps everyone on track while comprehensive upfront due diligence means it’s easier to narrow the field to the most relevant bidders. “By being as transparent and providing as much information as possible upfront, we can be sure we identify the most relevant buyers,” says Prichard.