There was a dramatic and necessary shift last year by banks to harness digital technology to execute M&A. That shift, as a result of societies in lockdown and travel restricted, has brought clear advantages and efficiencies that will have an impact on the way M&A is executed in years to come.
The initial adoption was challenging, but banks such as BNP Paribas, which execute M&A deals of all sizes in France and cross-border, are seeing more benefits in virtual deal execution.
“With the first lockdown there was a period when everyone adjusted to a new way of working,” says Bruno Villard, head of M&A for Europe, Middle East and Africa, at BNP Paribas. “But in the second lockdown things became more efficient and we even saw some of the fastest deal executions I have known,” says Bruno Villard, head of M&A for Europe, Middle East and Africa, at BNP Paribas.
We saw some of the fastest deal executions I have known
Management presentations moving online, and advisers to sell-side companies using smartphones and drones to conduct virtual site visits for potential bidders, helped speed up the process. What’s more, the shift to video conferencing platforms such as Zoom and Teams has made M&A bankers more efficient and cut travel times to zero, producing costs benefits and also speeding up negotiations and pitch processes.
“Pitch processes moved online during Covid and I believe that post-pandemic, this will continue in some situations because it can be more efficient,” says Christophe Jalinot, co-head of advisory for France at BNP Paribas. “But some interactions will still require physical meetings”
As lockdowns ease for some countries, just how much of the M&A process will continue to be executed online is a big question. In some respects, it depends on the industry sector. In industries such as technology, for instance, there is less need for a physical site visit. However, in the industrial sector, a lack of physical mobility potentially risks slowing down and undermining the M&A process.
“Where a buyer is looking at a physical plant or a mine, or even a retailer with a physical footprint, they will want to see that the facility exists, conduct their own due diligence and meet with management and staff,” says Jalinot.
In addition, travel restrictions have impacted the way in which the cross-border M&A processes work, posing implications for the future. “Going forward, it could mean that some bidding processes remain less global or take longer to execute in some sectors, depending on the buyers’ objectives,” says Villard.
Ultimately, technology has been a great enabler during the pandemic. And while M&A relies on face-to-face negotiations and intellectual capital, there is great potential to automate parts of the process in the future.
Automation is already creeping into to certain areas. For instance, many of the key processes in virtual data rooms are now automated, and artificial intelligence is increasingly being used by law firms to scour and analyse legal documents to identify outliers. In addition, other technologies such as big data can be applied by advisory practitioners to gain a greater understanding of company valuations.
The pandemic is likely to give rise to a new blended model of M&A dealmaking. What that looks like is yet to emerge, but Zoom pitches and virtual management presentations could become the norm.
“After the first lockdown, clients wanted to meet up to discuss bids and ideas and we do not see that element changing. But there’s no doubt that we have developed more efficient processes in some ways and that some digital trends are here to stay,” says Jalinot.