TrendWatch: Navigating Today’s M&A Market

Transcript

Duff Bryant
Partner, Corporate

Uncertainty around, obviously, not to get political, but the tariffs, what is going to happen on inflation? Are we going into a recession or not? Even if we are not, there is just all this uncertainty. What that causes buyers to do is use that as an excuse to wait, to nail down price, to come back on diligence because there is more uncertainty. They cannot price it. They are trying to figure out how to approach the deal. What is the structure? It is, I think, right now really, really challenging. If you want to get a deal done with any speed, that is just not going to happen.

What is the smartest way for sellers to gain leverage today? 

So I think right now if a seller is ready to move forward on a deal, I think there is a number of things they could do before they go to market or early in the process to maximize their leverage, and there is a couple of things there. First, and this is a plug for all my investment banking friends out there, if you can and the market supports it, partner with a bank to go out and create some real interest and create some tension. The number one goal you want if you are a seller is to have the appearance, even if it is fake, that there is lots of people that want to buy what you are selling. Whatever you can do to build up that sort of interest, and really I think the key to doing that well is working with a banker to make that happen.

The second thing I think sellers should do, and this is self-serving as a lawyer, but before they go out there, before they start sharing their everything, because that is what you have to do through diligence, they need to take some time, incur some money with lawyers, incur some money with accountants, and really look at their whole organization and figure out where are we good, where do we have gaps, and then take the time to fill the gaps, so that when you are ready to be responsive to the diligence requests and process that will ultimately come from these buyers, there is no delay. You are prompt in your response, you are organized, you are thoughtful, because then you are taking away the ability of the buyer to blame you for their need for more time.

What is deal fatigue?

…is help our clients understand the current state of play. Help them be mentally ready for what will inevitably happen, which is deal fatigue. A seller is most likely, or who we are interacting with, it is either the actual owner, it is the board, or it is the executive team. All of those folks have their day job, which is running this business and managing everything that goes into that. You layer a transaction on top of that, that is like two full-time jobs. You have to be ready mentally to weather that storm. If they have never gone through it before, which a lot of people are first-time sellers, that is a shock when suddenly there is so many demands on your time and you are worried about your business first and foremost, and then this deal becomes an annoyance instead of something that is exciting. That is when the deal fatigue sets in and it can kill deals. Helping them be ready to face that I think is critical.

Teams Solve Clients’ Problems

2025 has a real opportunity for people that are willing to take a little bit of risk. If they can find a way to price the risk of uncertainty into their offering or leveraging that into their business and differentiating what they are doing, I think there is tremendous opportunity to be early, an early entrant back into the market. I hope clients find ways to look beyond the noise, focus on what is core to their business, what really in that noise can help or hinder them, and where are the opportunities that they can dive in and make themselves stronger than they are now. To then be in a position to leverage that into further investment in their own business, position themselves to be a great opportunity for somebody else, and not letting the uncertainty get in the way of still driving towards your goals. I hope for that, and I say that also as a member of our executive committee, that I want our firm to think the same way. Uncertainty is scary, but anytime there is uncertainty, there is huge opportunities. If you can set aside your concern and your fear and your hesitation and really focus on what you can accomplish as an organization, I think that would be so beneficial to any client or our firm. I am hopeful that our firm will be able to do that in lots of ways, and I really hope that our clients can do the same.