When and Why You Need an M&A Consultant

The global Mergers and Acquisitions (M&A) market has been declining since 2022. While the volume of deals has dropped significantly, M&A consulting services continue to experience steady growth.?

Moreover, transactions are increasingly complex due to regulatory, geopolitical, and economic challenges. Let’s explore more in detail how M&A consultants can help.

Why It Matters

The financial, operational, and regulatory challenges of transactions often exceed the internal capabilities of many companies. The primary value of M&A consultants lies in their ability to ensure that transactions align with the company’s strategic goals while mitigating risks and facilitating smooth post-merger integration (PMI).

The M&A market, despite a 25% reduction in deal volumes in early 2024, saw deal values rise by 5%, largely due to megadeals in the technology and energy sectors. For example, ExxonMobil’s $60 billion bid for Pioneer illustrates how strategic investments are driving these megadeals.?

With M&A activity rebounding in the second half of 2024, especially in the technology and energy sectors, companies are cautiously looking for investment opportunities, and they need expert guidance to navigate the complexities of these transactions.

What’s Challenging

Several challenges are hindering M&A activity and heightening the need for consultant expertise:

1. Macroeconomic and Regulatory Pressures

Geopolitical tensions, political uncertainty, and an inverted bond yield curve have significantly complicated the M&A landscape. Rising interest rates and inflation have made deal financing more expensive, and increased regulatory scrutiny has delayed or disrupted transactions.

2. The Need for a Well-Defined M&A Strategy

In a recent Deloitte survey, 47% of private equity respondents and 44% of corporate respondents ranked a well-defined M&A strategy as the most critical factor for success. This includes target identification and screening, synergy identification and analysis, as well as risk assessment and mitigation strategies. Without the right strategy in place, M&A deals can lead to undesired outcomes.

3. Complexities in Due Diligence and Valuation

Corporate leaders highlight financial due diligence as a top priority, while private equity firms emphasize deal valuation and pre-close planning. As deals grow in size and complexity, the challenge of accurately assessing the target company's financial health, growth potential, and operational risks becomes increasingly difficult. Inadequate or flawed due diligence can lead to overvaluations or unforeseen liabilities, ultimately jeopardizing the deal.

4. Increasing Post-Close Integration Costs

Companies are allocating more resources to post-close integration as deal values rise. According to PwC, 59% of companies spend 6% or more of the deal value on integration efforts. This process, involving the alignment of operations, cultures, and technologies, is often more complex than anticipated, leading to delays and challenges in realizing projected synergies.

What’s Next

Companies frequently lack in-house expertise. This is where M&A consultants can provide the right expertise at the right time, guiding organizations through each stage of the process. Key roles M&A consultants take on include:

• Due Diligence Specialists : These consultants ensure that companies are fully aware of the financial, operational, and legal risks involved in a deal. They perform thorough assessments of the target company’s health, helping avoid hidden liabilities and ensuring regulatory compliance.
• Valuation Experts: Valuation consultants focus on determining the fair market value of the target company using sophisticated financial models. Their expertise is crucial in deal negotiations, ensuring that companies pay the right price and do not overvalue intangible assets.
• Carve-Out Consultants : When divesting or separating business units, Carve-Out Consultants manage the transition, ensuring minimal disruption. They specialize in structuring Transition Service Agreements (TSAs) and making sure that both companies maintain operational continuity during the transition.
• Negotiation and Deal Structuring Experts: These experts are pivotal during the negotiation phase, working to craft deal terms that align with both strategic and financial goals. Their deep understanding of deal dynamics helps secure favorable terms and smooth the path toward closing.
• Post-Merger Integration (PMI) Consultants : PMI consultants ensure that the two merging companies integrate seamlessly. They manage the operational, technological, and cultural aspects of integration, focusing on realizing projected synergies and minimizing disruption.

When selecting M&A consultants, it’s important to consider:

• Certifications and Experience: Look for consultants with relevant credentials, such as Chartered Financial Analyst (CFA) or Certified Fraud Examiner (CFE), depending on the role.
• Expertise in M&A Tools: Ensure that consultants are proficient in financial modeling tools like FactSet or ERP systems like SAP for integration processes.
• Strategic and Leadership Skills: Consultants should be able to align M&A activities with business objectives and communicate effectively with stakeholders, securing buy-in at all levels of the organization.

Engaging the right M&A consultants helps businesses overcome the complexities of transactions, ensuring a smoother process and better long-term results. With the right expertise in place, companies can mitigate risks, achieve synergies, and unlock greater value from their acquisitions.?

In particular, freelance consultants provide a more flexible and cost-effective solution compared to traditional consultancies or full-time hires. Here’s where consulting platforms like Consultport can facilitate the hiring process and give access to top-tier independent M&A consultants and finance managers .

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?? When and Why You Need an M&A Consultant