‘Cautiously optimistic’ was the phrase bandied around the event hall at this year’s M&A Forum, co-hosted by IR Magazine & Governance Intelligence. The investor outlook cast a positive light that 2024 will see broad improvements in M&A, compared with 2023, according to panelists at the event, held in New York on November 7.
The event brought together corporate governance, corporate development and investor relations professionals to discuss how to prepare for 2024 and what measures to take when learning to drive shareholder value.
Kicking off the day, the first panel session dived into the steps companies should contemplate taking to maximize opportunities once the market fully reactivates. Summarizing the current liquidity position for companies, Thomas Le, vice president of corporate development at Ziff Davis, flagged M&A, IPOs and raising more venture growth equity as three main attractive areas.
‘I think, for at least the next couple of quarters, M&A is probably the most viable option,’ he said. ‘IPOs will be put back on ice for the next couple of quarters after recent lackluster performance. The days of easy venture capital financing are over because, almost overnight, investors became much more discerning.’
He added, however, that ‘as markets settle and pricing comes back in 2024, it won’t necessarily be a boom, but it should be an improvement on 2023.’
Outlook for 2024
Echoing Le’s optimism, Alexander Fries, director of corporate development at Progress, said that despite the high prices being ‘somewhat’ a challenge, ‘we are really happy and optimistic for the future M&A market. We see it as a time where we’ll be able to participate more fully, and there will be more opportunities available to us.’
Offering advice to deal teams on how best to prepare for 2024, Fries suggested delegates in the room think about how to finance transactions while the marketplace is still settling. ‘Having financing in place will help you move quickly when you find the right target,’ he said. ‘And that’s a good way to differentiate in a competitive process as well.’
Another session looked at the impact the Biden administration has taken to being more assertive in its approach to antitrust enforcement. The panel session, moderated by Ben Maiden, editor-at-large of Governance Intelligence, reviewed what the recent merger guidelines proposed by the Department of Justice and the Federal Trade Commission, with new HSR [pre-merger notification] filing requirements, means for in-house counsel.
One speaker said delegates should think about the HSR filing requirements and merger guidelines together as ‘they really go hand in hand. If you’re doing a deal that has asset revenues outside the US, you may have a number of merger control filings and other jurisdictions.
‘The HSR filing you make in the US has had a fairly standard form for the past decades and the agencies came out with a proposed change to that form, which is incredibly significant in terms of the scope of what it will do to what information has to be disclosed.’
Elsewhere in the day, a session on communicating deal values looked at the red and green flags investors face around M&A. Panelists examined the impact communications around deals has on shareholders that may need more information on the company’s capital allocation strategy.
Michael Higgins, vice president of corporate strategy and IR at Advanced Drainage Systems, kicked off the discussion with insights into how best to communicate with shareholders when a deal is in play. ‘If you’re doing a deal and you need to start convincing shareholders, then when you announce it, you’ve probably already lost,’ he said. ‘You should be communicating upfront in terms of what your strategy is around acquisitions and you should be reiterating that message constantly.’
Thinking about the practical steps corporates can take before an M&A deal is finalized to ensure they are well positioned to communicate the strategy to shareholders, Higgins said it starts with a ‘relatedness and attractiveness’ test.
‘Relatedness is: how does that business fit from a cost and customer-sharing standpoint?’ he explained. ‘And attractiveness is: what’s the size of the market it’s going into? What’s its growth rate? What’s the financial profile, the competitive intensity? And when you score those opportunities, hopefully they score to the upper right.’