Common Ground

What makes a deal move forward?

Every transaction has internal considerations that affect deal speed.  These can range from the big-picture considerations of business complexity and heavily negotiated transaction terms, to the seemingly minor points of terminology in the negotiated deal documents.  Recent Booz & Company research points to an external factor that impacts the time required to seal a deal.

The recently published Merge Ahead: Mastering the Five Enduring Trends of Artful M&A, by Booz & Company’s Gerald Adolph and Justin Pettit, explores velocity and impatience as an emerging M&A trend.  Business processes that used to require multiple steps requiring human execution can now be performed in seconds.  Adolph and Pettit argue that shaving time and costs in a better, faster, cheaper competitive business environment creates carryover urgency in M&A transactions.

The evidence Adolph and Pettit present certainly suggests that the larger the deal, the more the need for speed plays out.  The authors report that between 2004 and 2007, execution time for mega deals – transactions of more than $1b - decreased by 20%.  Deals in the $100-500m range also took less time, decreasing by 18% over the same 3-year period (p. 57).   

Where is that 20% reduction in time coming from?  Is there a parallel reduction in expense, or are faster deals more costly? Is deal speed achieved with additional human and technology resources?  Is “quality” sacrificed in the process (whether in thoroughness of due diligence, understanding of deal terms, or other matters)?

For us at Transaction Commons, this discussion raises relevant inverse questions about the dealmaking process.  At what points in the process does a given deal bog down? What tools and practices are available or can be adopted to prevent deal slowdown?

The better, faster, cheaper business environment is premised on refining specific business processes for efficiency.  This principle can and should be applied to dealmaking. Defining and streamlining key steps in the deal process and applying the right tools at the right time might be among the most efficient, cost-effective and valuable ways to achieve forward momentum.