Wednesday, July 16, 2008

M&A Due Diligence Costs European Cross-Border Dealmakers Over £110 Million a Year

• Due diligence expenses are £20,000 per cross-border deal
• Air travel during due diligence accounts for almost 100,000 tonnes of CO2 per year
• Dealmakers increasingly conducting due diligence online to reduce costs and time

London and St. Paul, MN – Dealmakers in Europe spent over £110 million in the past twelve months on overseas travel related to conducting due diligence on cross-border deals, contributing 98,000 tonnes of ozone-depleting CO2 to the environment, according to new research commissioned by Merrill DataSite, the acknowledged leading global provider of virtual data rooms (VDRs).¹ 

According to the research conducted amongst executives in the UK, Germany, France, Sweden and the Netherlands from the financial, legal, corporate and private equity spheres, overseas travel-related costs amount to an average of £19,500 during the due diligence stage of a deal, although 15% spend more than £30,000.

The research also reveals the environmental cost of due diligence-related business travel. Collectively, due diligence-related flights during cross-border transactions use an estimated 98,000 tonnes of CO2 every year.² Dealmakers estimated that an average cross-border deal involves five international plane trips per individual, with almost a quarter (24%) of respondents taking eight flights or more.

Given that the average UK person’s carbon footprint is 12 tonnes per year, the total emitted for due diligence purposes alone is the equivalent to the annual output of 8,000 people.

As further evidence of the environmental impact, according to Merrill DataSite, each cross-border deal involves an average of 20,000 pages of paper and it estimates that due diligence paperwork on last year’s European cross-border transactions amounted to over 112 million pages.

Increasingly, many firms are using VDRs for their due diligence, because they accelerate the process by enabling review teams to work online, at any time from anywhere in the world. Of those people surveyed who had used VDRs before, half of them thought using one reduces the time required for due diligence by more than 30%, and one in ten thought it compresses the time by more than 50%.

Merlin Piscitelli, Director at Merrill DataSite said: “Aside from the environmental impact, old-fashioned, paper-based due diligence delays deal time, a serious detriment to companies’ ability to react quickly in an uncertain market environment where market valuations often fluctuate."

“We have seen a significant increase in the number of deals being conducted through our VDRs in Europe over the past 12 months and a rise in the average number of pages relating to each deal. This is a clear signal that firms are looking to keep their costs down during due diligence and, having realised the benefits that a VDR brings in trying to achieve this, are moving an increasing amount of their due diligence activity to an online platform.”

Merrill DataSite’s research found that, on average, executives spend seven and a half days out of the office during due diligence, with nearly a quarter of respondents (24%) saying they would spend 11 days or more out of the office.

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¹ Research conducted by mergermarket of executives in the UK, France, Germany, Sweden and the Netherlands from the financial, legal, corporate and private equity spheres. A total of 13,324    global deals were announced or completed in the 12 months from June 2007 to June 2008.
² Based on a return flight from London Heathrow to Berlin Templehof: http://www.carbonfootprint.com/calculator.aspx

Patrick Evans / Alex Bell - Citigate Dewe Rogerson
Tel: +44 20 7282 2913

Merlin Piscitelli - Director, Merrill DataSite
Tel: +44 917 761438

About Merrill DataSite

Merrill DataSite is the acknowledged leading global provider of turnkey virtual data room (VDR) solutions. It combines the industry’s leading technology with highly secure technical and operational environments, and a professional staff dedicated to customer success.

Merrill DataSite has hosted VDRs for thousands of clients and millions of visitors, representing transactions totalling billions of pounds in asset value. Its VDRs handle any transaction requiring due diligence, including M&A deals, IPOs or secondary offerings, REITs, loans or financing facilities, and bankruptcies.

Merrill DataSite is part of Merrill Corporation, which was founded in 1968 and is headquartered in St. Paul, Minnesota. Its international operations are headquartered in London, with other European offices in Frankfurt and Paris.

Jonathan Henderson
Citigate Dewe Rogerson
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London  EC2M 5SY
 
Switchboard:  0207 638 9571
Direct Line:      0207 282 1057
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Email                jonathan.henderson@citigatedr.co.uk

For more information see: www.citigatedewerogerson.com

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