By Mark Loehr, CEO, OpenExchange
With speed, efficiency and security, momentum around virtual M&A transactions is building.
As companies plan to return to some form of in-person work, leaders are contending with the indelible mark the pandemic had on the way they do business. Virtual meetings, the default way to meet, negotiate and cut deals over the past two years, are here to stay. Research firm Gartner predicts that by 2024, in-person meetings will drop from 60% of enterprise meetings to 25%, largely due to remote work and changing workplace demographics.
Unsurprisingly, dealmaking, perhaps the last vestige of ceremonial in-person meetings, is shifting online.
“Today’s environment requires a creative approach when it comes to meeting the management team or walking a facility,” J. Neely, senior managing director and global M&A practice leader for Accenture, writes. “We have seen the cost efficiencies and speed of virtual M&A—and for those reasons, among others, I don’t think things will go back to the way they were.”
Executives across industries concur. A Deloitte survey of 300 executives at corporations and private equity investor (PEI) firms last year found that 58% of respondents expected to manage dealmaking transaction execution virtually compared to just 19% who planned to do so in person.
So why are leaders across industries shifting toward virtual M&A transactions? Let’s examine some key advantages.
- Time is not on your side. Professionally managed virtual meetings allow M&A dealmakers to cycle through critical meetings without the burden of logistical considerations, including travel. Deals that used to take weeks or months can be cut down to hours or days. Virtual meetings have moved from becoming a necessity to a medium that drives efficiency and results.
Dealmakers “have relied on the speed of virtual interactions to triage through record numbers of deal opportunities,” notes Catherine Code, national M&A leader and vice chair at Deloitte Canada. In a volatile market, virtual meetings let capital markets executives maximize opportunities to secure favorable deals.
- Security. With in-person meetings, information can leak out prematurely, with parties at risk of losing leverage in M&A negotiations. Information leaked can be taken out of context, compromising discussions and potentially causing reputational challenges.
The threat of leaks is very real: According to a study from the M&A Research Centre, 8.2% of all deals announced in 2020 involved a leak, with real estate, retail, as well as energy and power being the three sectors with the highest pre-announcement abnormal trading in 2020.
In-person meetings can also be subject to greater scrutiny, with external parties being able to monitor the movements of key leaders. For example, hedge funds monitor private planes for investing purposes, and if such information is made public, the significance of a meeting could be taken out of context and result in negative repercussions for all parties involved.
Of course, virtual meetings, when conducted securely, aren’t carried out using infrastructure that supports day-to-day business discussions. They’re professionally managed and use tools that incorporate strict controls and proper use of waiting rooms and breakout sessions. They also help parties ensure that the right people are participating in meetings at any given time. Utilizing a professionally managed meetings platform takes the burden of security off of banks and dealmakers; these security tools and tactics are overseen by the platform’s meeting management team so that capital markets professionals can focus on the deal at hand.
- Virtual meetings let you easily tap data to underpin due diligence efforts during discussions. The growth of videoconferencing is happening alongside an increased appetite for data to underpin M&A efforts. Analytics tools let participants analyze large volumes of data to support transactions. “Data can tell a visual story that is now expected to accompany traditional in-person management meetings,” argues Ms. Code. With virtual M&A meetings, participants can easily and discreetly consult data during consultations to ensure they make informed decisions.
- A neutral location. The location of physical meetings can give some parties an unfair advantage in negotiations. Virtual meetings level the playing field, ensuring transparency and giving each party the confidence that they’ll be treated fairly.
Virtual meetings add speed, efficiency and secrecy to M&A transactions. The lessons from the pandemic ensure that they will continue to be front and center.
“My prediction is that more deal execution and more of the overall M&A life cycle will continue to be conducted without extensive travel or face-to-face-meetings—by choice,” said Flora Wan, a partner in Deloitte’s Transaction Services practice.
Virtual meetings give capital markets executives the tools to progress through a myriad of discussions with ease and efficacy. Deals can progress quickly, helping parties navigate market volatility. They also offer participants added security and confidence in the outcome of negotiations, nurturing goodwill to sustain ongoing relationships. A virtual meeting strategy ensures all participants are equipped with the tools to navigate complex situations, while ensuring that they can effectively control the messages externally.