Advanced M&A Diligence Strategies: Elevating Your Framework

Welcome to SS&C Intralinks' new podcast, The Dealist, created exclusively for corporate and private equity mergers and acquisitions (M&A) dealmakers. In our first season, we're diving deep into due diligence, unpacking how to master the diligence process and drive smarter deals. 

For our first episode, "Advanced M&A Diligence Strategies: Elevating Your Framework," we're joined by Valeriya Vitkova and Scott Moeller, of the M&A Research Centre (MARC) at Bayes Business School, City, University of London, who discuss: 

• Advanced diligence methodologies and frameworks
• Real-world case studies of complex diligence challenges
• How experience, intuition and data-driven analytics combine for better outcomes
• Plus, don’t miss an M&A war story you have to hear to believe

Host: Catherine Ford
Further reading: The Dynamics of Due Diligence

Transcript

Catherine Ford: Welcome to The Dealist, your insider's guide to navigating the complex world of M&A. My name is Catherine Ford, and today I've been joined by Valeria Vitkova and Scott Moeller, both of Bayes Business School, who are going to help me discuss how we can elevate your framework when it comes to due diligence. Welcome to both of you. Thank you so much for joining me today. Let's get stuck straight into what we're going to be talking about today.

Catherine Ford: I would like to spend some time at the beginning talking about how, over the last decade, the framework that we're talking about when it comes to due diligence has been elevated. Val, maybe you can kick us off with that topic.

Valeria Vitkova: Yeah. The due diligence process has changed significantly over the last decade. It has become more complex and also more important than ever before. This was the focus of the recent report published by SS&C Intralinks, where we analyzed key dimensions of the diligence process, such as the length of the diligence period before deal announcement, the volume of information shared, and the number of people involved.

Valeria Vitkova: Importantly, we've identified long-term trends by examining changes over the past decade using a large dataset. First, focusing on how long it takes to complete the diligence process, this has gone up by 64 percent over the last decade. It now takes over six months on average, compared to about four months a decade ago.

Catherine Ford: Can you pinpoint why that is? That’s quite a significant increase in the amount of time being dedicated. Is this due to the sheer amount of data we’re working through? Or is it the number of people involved in the process? Or maybe the kinds of risks being considered?

Valeria Vitkova: Yes, I think it’s actually both. The number of people involved in the due diligence process has increased by approximately 64 percent as well. A decade ago, there were about 152 participants in the virtual data room (VDR), whereas now there are roughly 250. Similarly, the volume of information shared in VDRs has gone up, now averaging around 7,500 files. These factors collectively contribute to the extended diligence timeframe.

Catherine Ford: Scott, I’d like to bring you in here. You’ve obviously worked on due diligence over the years, back when everything was paper-based. Can you share some of your experiences and tell us how things have evolved?

Scott Moeller: Absolutely, Catherine. Valeria made an excellent point about the changes over the past decade, but if we go even further back. I appreciate the opportunity as someone with a bit of gray hair to add my perspective! When I started, due diligence involved stepping into physical data rooms where documents were stored in file boxes, often managed by a paralegal. You’d have to request specific files, manually search through them, and jot down notes, which was cumbersome.

Scott Moeller: Then, access was very limited. If it was a competitive bid, stakeholders might only have two-hour slots to look at documents. Compare that with today, where VDRs allow 250 participants and 7,500 files. The entire process has transformed. We've gone from a labor-intensive, time-constrained endeavor to leveraging virtual, searchable platforms with almost limitless data availability.

Catherine Ford: It’s fascinating to think about the shift in scale over time. You mentioned earlier that involving 150 participants in a single process would’ve been unthinkable in those earlier days. How has VDR technology fundamentally improved due diligence?

Scott Moeller: The improvements are profound. For one, digital VDRs provide unlimited, searchable data, which eliminates the painstakingly manual processes of the past. You can now track which stakeholders access specific data and for how long, making oversight easier. Updates to the data room are also seamless, ensuring everything is current. These technological enhancements support efficiency and accuracy while significantly cutting down on human error.

Catherine Ford: That’s a great segue. Val, I’d like to steer the discussion toward risk. With evolving challenges in due diligence, where do you see the focus shifting now? Are some areas of risk being overlooked?

Valeria Vitkova: It’s not that risks are being overlooked, but the focus has expanded significantly. Two key aspects worth mentioning are regulation and deal leaks. For example, stricter global antitrust policies mean that more deals are being scrutinized, with regulators considering factors like labor market impacts and acquisition history. Protectionism is another growing concern, as demonstrated by the EU’s adoption of foreign direct investment regimes, which now cover more sensitive sectors and include expanded triggering criteria.

Valeria Vitkova: Another key area is cybersecurity, as its quality can directly affect valuations and negotiations. Also noteworthy is the rise of environmental, social, and governance (ESG) considerations, particularly in the EU. Directives such as the Corporate Sustainability Due Diligence Directive require companies to demonstrate plans for preventing negative environmental and human rights impacts.

Catherine Ford: Deal leaks are another interesting area, especially given how complex due diligence has become. What’s being done to manage this risk?

Valeria Vitkova: Deal leaks have become an increasing concern due to factors like the growing number of stakeholders and advances in social media, which makes anonymous sharing easier. Regulators expect companies to implement robust anti-leak safeguards. Notably, our research suggests leaks are more likely to occur closer to deal announcements rather than during early stages of the diligence process.

Catherine Ford: Thanks for those insights, Val. Scott, could you speak to how blending data and human intuition plays a role in modern due diligence processes?

Scott Moeller: It’s a delicate balance. While large-scale data and AI tools offer rational, data-driven inputs, gut feelings still matter, especially for evaluating people and culture. When you’re acquiring a business, you’re investing in its people, so understanding the human element is critical.

Scott Moeller: I recall one deal where junior finance colleagues and I were tasked with reviewing a manufacturing plant. While everything looked amazing, we lacked the expertise to assess operational efficiency. This underscored the importance of involving the right specialists from the start. Modern VDR platforms allow for more robust team collaboration, enabling diverse stakeholders to contribute their expertise.

Catherine Ford: An excellent point, Scott. To close, how do both of you see diligence evolving in the next 10 to 20 years?

Valeria Vitkova: I think data’s importance will continue to grow, especially with advancements in AI. Unstructured data, like text or video, will become a key focus, giving even deeper insights to dealmakers. AI tools such as natural language processing will help quantify risks and improve regulatory and macroeconomic assessments.

Scott Moeller: I agree with Val. Technology will continue to speed up processes, but putting the right people on the job remains vital. Planning and communication will also grow in importance, as complexity increases. Overall, diligence will rely on blending technology with human expertise to foster better decision-making.

Catherine Ford: Thank you both for those deep dives and candid stories. That wraps up today’s episode of The Dealist. If you found value in this conversation, subscribe and share with your colleagues. See you next time.