Navigating the new extended M&A timeline

Just a few years ago, the expected path to navigate a merger or acquisition from announcement to close was relatively predictable. Antitrust counsel usually had a good read on where regulators might raise issues and what remediations might be required to deal with them. In most cases, that meant mega-deals would take around three quarters from announcement to final regulatory approval. Some even cruised through in 45 days, with no second requests. It was a safe assumption that deals under an HSR (Hart Scott Rodino Act) threshold could close in a matter of weeks.

Regulatory complexity demands stamina

Roll forward to today, and everything’s changed. Dealmakers are having to get used to far more protracted timelines. So what’s slowed it all down? For a start, volatile macro-economic and geopolitical conditions have created greater complexity and uncertainty. Changes in the regulatory environment have also played a big part. Cross-border deals involving China are non-starters, and more generally big tech remains in regulators’ crosshairs on both sides of the Atlantic.

As demonstrated by the Microsoft Activision deal, we’ve seen the UK’s Competition and Markets Authority emerge as a third major body to navigate in addition to the US Department of Justice, Federal Trade Commission and the European Union. These agencies are stretching the definition of anti-competitiveness to challenge deals on the grounds of future potential competition or vertical integration. And the scope of remediation requests can be much wider, with different requests coming from multiple authorities.

Combined, these factors create a new dealmaking landscape in which it’s not been unusual to see deals fall apart 12 to 18 months post-announcement. That’s not to say that deal-making has dried up. 2024 has shown signs of life, with Reuters reporting M&A activity climbing 30% globally to hit more than $755 billion for Q1 2024. But, this is still way off the trillion dollar quarters seen mid 2020 through 2021. However, with projected timelines for deals now extending beyond 12 months and even in some cases 18-24, companies must be ready for the long haul and have the conviction to see themselves through a much more contested process.

Longer timelines present new risks

In a world in which deal close could occur within two to three quarters, rapid integration planning and implementation was essential to accelerate value realization from Day 1. But while the pressure to realize value for investors is just as pressing, today’s extended timelines add extra stresses to the calculus of how, when and with what intensity to plan. Do too much work and incur too much expense early on and it could come to nothing but wasted time and investment.

There’s also the potential risk of destabilizing workforces over longer periods and burning out employees with double duties for more than a year. That’s not all: Miscalculations of activity timing could trigger additional regulatory scrutiny for activities historically considered within the legal guardrails for pre-close work.

Four principles for managing new M&A timelines

Postponing planning until close is clearly not the solution for longer M&A timelines. That would put deal cases way behind, leading to delayed synergies, organizational confusion and rushed decisions. So, what is the right balance? Here are a few principles to start with:

• Adopt a “peel-the-onion” approach. Start with a smaller, leadership-heavy group to frame out the integration vision, building on diligence, teeing-up key decisions, and prioritizing allocation of effort according to value, lead-time, and complexity. This might be considered “super-chartering,” but it can make very clear what work needs to be done and when to pull in more resources to do it.

• Establish overall planning governance early but be flexible about date ranges for completing different stages of work. Historically, planning has followed one shared timeline with all teams moving in lockstep through stages like baselining, end-state recommendations, synergy estimation, detailed planning and interdependency resolution. With extended close windows, working asynchronously may make more sense. A benefit of this can be earlier resolution of issues over interdependencies, or how support organizations need to align. That will mean faster progress further down the line or stronger assumptions for those teams that start work later in the process.
  
  
• Stay focused on Day 1 readiness and assume initial plans will have to be complete by the earliest expected close date. Aim to have MVP integration plans ready by this point along with well-developed first 100-day plans. That way, if companies catch a lucky regulatory break, they’re not caught off-guard. The reality is, however, that with most major transactions likely to encounter some delays, there will be plenty of opportunity to augment and refine planning or, in some areas, plans can be put on ice until close approaches.
  
  
• Leverage technology, especially generative AI, to expedite and enhance planning. Technology, over the last decade, has contributed to reducing friction and effort and to support better decisions in M&A. It has further helped to maximize the value of human time spent on planning through the use of digital planning environments for integration management, organization development, culture and change engagement, technology diligence, contract analysis and more.
  
  Generative AI can take this to the next level. With the power of generative AI across M&A deal activities, an extended close window presents more opportunities to leverage it to explore and maximize the transformative power of a major deal. That could mean developing first-pass integration plans in a matter of hours, identifying new synergy opportunities and unlocking process reinvention opportunities for the newly combined enterprise to enable an entirely new level of scale efficiency.

While not exhaustive, these principles will be crucial for navigating today’s longer dealmaking environment. Of course, in every deal case, context will always matter. What are you seeing and experiencing in the market? What’s working well? What needs to be rethought? Are you on the sidelines until the winds change, or leaning in because you don’t see this getting easier any time soon? My details are at top. Connect with me to discuss how your company can plan ahead for these new dealmaking realities.