NEW
YORK, June 18, 2024 /PRNewswire/ -- Many
professionals (43.2%) involved in their organization's M&A
efforts, including those who directly serve on or contribute to
corporate development and transactions workstreams, indicate they
expect the level of due diligence requested on target acquisitions
to increase in the next 12 months compared to the previous year,
according to a Deloitte poll. That is an eight-point increase from
a similar poll conducted in February
2023 which found that 35.2% of M&A professionals
expected the duration and extent of buyer-requested due diligence
to increase.
According to the data, heightened due diligence efforts are
likely to focus on a smaller number of deals, with 40.7% of
respondents indicating plans to pursue between one to two deals in
the year ahead.
"Up until recently, the M&A market had slowed down
considerably over the past 24 months. This was leading many
acquirers to become more selective and focused on performance in
the deals they pursue," said Jack
Koenigsknecht, a partner in M&A transaction services,
Deloitte & Touche LLP. "As a result, dealmakers, CFOs and other
finance leaders are adapting to this environment by increasingly
leveraging due diligence to identify the best targets and uncover
silver linings that can help maximize value post-deal or help avoid
costly issues. Currently, the quality of data and the systems used
to capture it are a huge focus of diligence efforts."
For 29.1% of respondents, economic concerns are driving the need
for heightened due diligence, primarily to support deal forecast
models. Another 24.1% say more due diligence is needed to support a
successful merger through post-merger integration planning, while
17% attributed diligence needs to the tougher lending
environment.
Despite lending challenges, more than one-quarter (26.6%) of
M&A professionals say their organization's primary financing
vehicle for acquisitions in the year ahead will be lender
financing, including third-party loans from traditional lenders,
private investors, and government sources (24.1%), or high-interest
mezzanine loans (2.5%). Many (30.3%) respondents indicate that cash
will remain their primary financing option, while another 15.9%
indicate a preference for equity financing.
"Cash is king in a tough lending environment, but not everyone
has access to low-cost capital," said Bryan
Martin, a partner in M&A transaction services, Deloitte
& Touche LLP. "For those acquirers exploring lending options,
and especially for leading acquirers, due diligence becomes a
critical lever in both negotiating and securing financing terms.
It's also critical for positioning the future, merged organization
in the best way possible to access post-merger funding that may be
needed for major capital projects, working capital issues, or some
other business need."
To learn more about leading practices that acquirers can
consider during integration planning, visit our website for more
information.
About the online poll
More than 740 professionals
involved in M&A for their organizations were polled during a
recent webcast, titled "Be a prepared buyer: Acquisitions
accounting and tax considerations," on Dec.
13, 2023. Answer rates differed by question.
About Deloitte
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including nearly 90% of the Fortune 500® and more than 8,500
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457,000 people worldwide connect for impact at
www.deloitte.com.
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SOURCE Deloitte