Datasite Roundtable Dives into Buy-side M&A and Corporate Development Trends

By Michael B. Kennedy II, Regional Vice President, Sales

The world is gradually reopening, and M&A Americas activity is up 21% the last six months YoY, according to Datasite Insight. Valuations are soaring, making it tricky for top buyers to succeed.

To get some perspective on the situation, Datasite brought together a panel of corporate development leaders to explore how dealmakers are navigating today’s landscape. Moderated by Abby Roberts, Sr. Director, Product Marketing at Datasite, “Corporate Development Outlook: Buyer’s Circle” is the first in a quarterly roundtable series focusing on corporate development trends.

Despite, or because of, the fizzy market, strategic buyers are facing strong headwinds. Robert McIntosh, Vice President, Corporate Development at Autodesk, explained: “We're seeing increased competition across the board by private equity, strategics and also access to IPO markets, let alone this whole SPAC idea. Timeframes are much faster.”

But the greatest challenge strategics see are pricey multiples. In a live poll, 73 percent of webinar participants said that inflated valuations were the biggest challenges that corporate buyers face in this environment, and the panelists generally agreed.

As usual, buyers are working on many transaction types and looking at new deal structures. Brett Simon, Sr. Director, Corporate Development at Coupa Software, noted that corporates are seeing every category of transaction type bubbling up, supported by many more options in terms of access to liquidity. He pointed out that today’s deals are not only about lots of different transaction types, but the creativity of people in how people are structuring deals to get things done, through mechanisms like SPACs.

SPACs take center stage—but for how long?

SPACs are top of mind, with even corporate buyers dipping their toes into the SPAC waters. But many are still taking a skeptical view, with 58 percent of respondents in an interactive poll saying they believe SPACs are more a fad than the future. Christina Ungaro, Global Head of Corporate Development at Jones Lang LaSalle (JLL), agreed, but characterized SPACs as more of a bubble.

“I think we'll see some SPAC failures. That's inevitable,” said Ungaro. “There are a lot of companies that are going public that are really not ready to be public, so that's going to play out. But, we're in early innings here still, and it's going to take two or three years for this to really play out. And SPACs have been around a long time, and they'll be around forever, I don't think they're ever going to go away, but I do think the current level of SPAC creation that we're seeing is a bubble.”

Buyer’s sector insights

The conversation shifted to a look at specific sectors. McIntosh and Simon both observed that digitization is continuing to transform industries from construction and manufacturing to media and entertainment. 

“One of the big technology trends that we're watching right now is automation,” said Simon. “Five to 10 years ago, the buzzword was analytics, making sense of all the data that you have, and making it prescriptive. Now, a lot of customers are saying, ‘don't just tell me what to do, but actually do it for me.’ We're seeing this play out in a whole host of different processes, including processes related to business spend, and things around that universe.”

Buy-side Best Practices

The conversation turned to lessons learned from a buyer’s perspective. According to 54 percent of the webinar audience, cultural assessment and fit were considered the most common mistakes buyers make, followed closely by mis-estimating synergies (46 percent).

Ungaro agreed that cultural assessment is one of the hardest things to get right, and will vary deal by deal. She pointed out that it’s hard to assess cultural fit when you're talking to the top layer of management, and that it’s important to find creative ways to get a few layers down into the organization and understand how a company really operates day to day, and makes decisions, and manages their relationships with clients. Fortunately, it can be done with a lot of practice and good guidance. 

When it comes to key ingredients for a strong buy-side process, McIntosh spotlighted executive alignment as the number one factor that drives success in deals. The audience agreed, with 60 percent citing it as the top factor. McIntosh’s team analyzed more than 150 acquisitions closed over the last decade using multiple visualization tools. If there was strong executive alignment at the top pushing and driving on acquisitions, his team found that those were the ones that were most successful on the other side. 

The talk concluded with a lively Q&A session, with participants inquiring about how ROI is measured on past deals, what sellers can do to prepare for a sale, and more. If you’d like to take a closer look at some of the perspectives shared on the webinar, sign up to view it on demand.  

Data source: Datasite webinar, "Corporate Development Outlook: Buyer's Circle", March 2021.