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NY Groundview: Bill's Top 4 Diligence hacks

Abby Roberts, Director, Merrill Insight™ | October 04, 2018

A conversation with Bill Polese, director DatasiteOne, on New York corporate due diligence and M&A trends. Bill lives in Mt. Kisco, NY with his wife, children and one very rambunctious puppy.

Q: What are common corporate due diligence challenges?

In periods of heightened market activity like this one, diligence speed becomes incredibly important. And critical to that is organization.

Generally, mid-market or larger companies may have as many as 50-100 internal and external people driving diligence on an acquisition or divestiture target. Clients still experience a lot of pain points around organizing and staying current, especially if they’re working off email or Excel. Deal managers and team members may miss critical emails or experience version control issues, causing delay and confusion.

On the flip side, smaller companies often don’t have the infrastructure or resources to handle diligence efficiently when the time comes to do a deal. Regardless of size or shape of the execution playbook, our project managers can make a significant impact because they come in and help organize the deal room for the client.

Q: What are some due diligence hacks you’ve picked up?

Big companies usually have structures and playbooks in place that allow them to operate with urgency and agility. They will give me a 400-line diligence checklist in advance and ask Merrill to create a diligence room based on that checklist. Some other practical tips:

  1. Know your team’s data room fluency. If you are the corporate development lead, do a sense check on your cross-functional team’s experience using a data room or running a process. Some members will be fluent, but others are not, and it can be overwhelming. Communicate early on who needs help, so our project management teams can get novice members up to speed quickly.
  2. Keep a working group list in your DatasiteOne sandbox. This simple step often gets overlooked, but you want to make sure the list is easy to find, so everyone on the team knows “who is managing what.” The sandbox also is a good place to keep other core documents that need to get referenced regularly.
  3. Sketch out your deal lifecycle in advance. Projects have a beginning, a middle and an end. Well organized clients have a high degree of confidence that a project will be done by a certain date. Timelines help them stay focused on execution.
  4. Set up regular calendar calls with your data room provider. Without timeframes, clients can forget they have a diligence room running, or forget that Merrill can tackle administrative tasks. Merrill goes to clients proactively and says “hey, you’re about to run out of your contracted time,” or “can we help you with setting up roles?” Regardless, setting up time with your PM can minimize costs and brain damage.

Q: What trends do you see in the New York M&A market?

I’m seeing three general trends. First, aerospace and defense activity is up, especially in the manufacturing and electronics subsectors. Second, the insurance sector remains soft – too many underwriters and captives with lots of premium. Those conditions are spurring roll-ups, especially among specialty providers like cyber and marine. On the agency and brokerage side of the business, smaller firms writing less than $500-$600 million in premiums are getting boxed out and exiting to larger platforms.

Finally, in New York City, the media and entertainment industry is always predominant, and that hasn’t changed. Meredith just sold Time to Salesforce CEO Marc Benioff, and we’re all watching National Amusements battle with CBS play out. This has been complicated, of course, by CBS CEO Les Moonves stepping down because of sexual misconduct allegations.

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