August 18, 2020
Whilst many of us are hopefully taking some well-earned holiday during August, we are all wondering when M&A activity will start to pick up in a sustained fashion.
Whenever there is market dislocation, there is always a pause whilst everyone adjusts to the new norms. The same applies to M&A. Sellers need to adjust their value expectations, and buyers need to have more confidence on what the next 6-18 months looks like in terms of likely financial performance.
By interacting every week with over 150 private equity investors, business leaders and professional intermediaries, Drax is in a unique position to feel the pulse of the M&A market. Whilst activity remains subdued, deal pipelines are slowly rebuilding, and we feel a real sense of optimism that M&A activity is going to pick up in a sustainable way in Q4 2020.
An important part of our time at Drax is spent advising our clients “pre-deal”. Across all our sectors, we work tirelessly to leverage our extensive network to help our clients to find differentiated angles on live transactions.
Our pre-deal transaction support capabilities include the following:
1. Access to a talent pool of senior executives who can provide invaluable advice during the due diligence process
2. Identification of buy-in CEO / Chair candidates
3. Introduction to management teams ahead of a sale process
4. M&A bolt-on target identification, with introduction to relevant stakeholders
5. Outside-in assessment of incumbent management using our LSPM and PACE tools as well as confidential referencing
As economies recover from Covid-19, many seasoned investors we speak to expect there to be a flurry of corporate carve-outs. Corporates will be encouraged, or in some cases forced, to divest assets. These businesses will often have been embedded within a diversified group for decades and are therefore relatively unknown to the private equity community. A recent example of this was ThyssenKrupp Elevators which has become one of the largest buyouts in history.
Identification of potential corporate carve-outs is an area where we are receiving frequent requests to assist our clients. By leveraging our network of senior executives, we can promptly provide access to people who have genuine insight and knowledge.
Once the opportunity is identified, Drax is well positioned to assist the investor to quickly get up the learning curve on the asset, to understand the opportunities and risks, and to put together a team which allows them to be differentiated from other bidders, and potentially find a winning angle on the transaction.
As we all return to our desks (home or office) in the next fortnight, we look forward to helping our clients to rebuild their deal pipelines, and ultimately to invest their dry powder in attractive value-creating opportunities.
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