Tulane takeaway: Deals are hard, not impossible
The annual Tulane deal gathering kicked off in New Orleans on Thursday, with antitrust and supply chain concern dominating conversation.
Why it matters: The common theme was that there's a harder antitrust regime in town, and that any large M&A is going to be hard, particularly in the tech space. But paths to success exist for companies that do opt to pursue deals.
- The first panel, "Hot Topics in M&A Practice," featured advisory heavyweights who gave their views on the current climate.
State of play: "Tech deals are hard to do right now....The antitrust bias we're dealing with makes tech deals a lot harder to do," said Scott Barshay, a Paul Weiss partner.
- He added that "adjacency" deals will be more common, where companies scope out smaller acquisitions in adjacent markets, dodging the regulatory thicket.
Yes, and: The panel added that companies that do push ahead with M&A are required to do much more due diligence (via hordes of consultants) to ensure that macro and regulatory constraints don't torpedo the merger before it even happens.
Yes, but: Even with that approach, getting a deal done is tough. Gordon Dyal, founder of Dyal Partners, said the antitrust concern is such that he's advising some clients to walk away from high premium offers because the failure of such a deal would be more damaging than the heat taken for turning it down.
- "I’m advocating to not sell a company more than ever before. No matter how attractive the premium is," Dyal said.
- And a break-up fee doesn't fully ease the pain of a broken deal, he says. It's indeed a challenge to get a client to understand the risk, and to realize that in some cases, "a 45% premium just isn't worth it."
Of note: Melissa Sawyer, a Sullivan & Cromwell partner, said before pursuing a deal, management teams need to check in on their boards.
- Regular board turnover and the willing adoption of zoom meetings means that many boards lack the familiarity and rhythm that inform successful M&A.
- "Help boards rebuild that thread of connectivity," she says. "Get them to feel a sense of trust."