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DIALOGUE@FF: Navigating New Realities

Explore The latest thought leadership and dialogue shaping the narratives on emerging and frontier markets, economics, global trends and more

Navigating New Realities in the Global Deal Landscapes

Dialogue@FF

Thought Leadership

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In recent weeks and months, the primary focus – with good reason – has been on the extensive impact of the COVID-19 pandemic on lives and economies worldwide. However, beyond the headlines, a number of fundamental shifts have occurred whose implications for deal transactions extend far beyond the crisis.


The virus has caused significant changes to working practices in banks and financial institutions, and one of the most significant is in technology and the shift to virtual working. Investment banks and investors who have taken large steps towards digitization have a clear advantage over their counterparts. Inability to access or travel to seller sites has been a challenge for many whilst attempting to originate deals and complete their due diligence despite the recent relaxation of lockdown. 


Deal origination is a labor-intensive process, conducted through accessing business owners in their immediate network, screening through in-bound deals, speaking to investment intermediaries and proprietary deal sourcing. These methods, given today’s realities, are unsustainable. A potential solution to this obstacle is the adoption of digital methods to carry out deal origination. Investment banks and investor institutions can gain a competitive advantage in their deal origination process by embracing some of the available network platforms and technologies. These platforms and their intelligent data matching capabilities can provide users with innovative deal sourcing, screening flexibility, dynamic collaboration with intermediaries and co-investors.
 

Now more than ever, data and its accessibility is a critical element for deal making and more specifically, effectively carrying out due diligence. With uncertainty in the markets, the demand for information rises exponentially. Innovators are looking to run virtual roadshows, virtual due diligence and site inspections using drones and cameras. While many argue that the use of such technology may not be a substitute for on-site physical inspection, such methods coupled with a careful consideration of historical site information may allow an investor to ascertain any risks and address any concerns it may have. Different aspects of the transaction process could potentially adopt a variety of practices to mitigate the implications of the pandemic on deal origination, execution and closing. 


Conclusively, the deal landscape is likely to undergo a dramatic transformation in the near future. Financing will not be an after-thought, deal terms will undergo a revolution, covenants will be tightened and warranties and earn outs will be increasingly popular. How does an institution ‘win’ is the new normal? By being adaptable to the changing tides and adopting systems and practices that will give them meaningful advantage.