Mergers and acquisitions (M&A) are an integral part of any industry’s success – they allow smaller businesses’ ideas to flourish under new leadership and allow innovators to work alongside one another, rather than against each other. The pandemic put a pause to most things as we knew them, and M&As were no exception.
We sat down with Stuart Clout, co-founder of virtual data room platform fintech, Ansarada, to get a greater understanding of how the sector has evolved with emerging trends, like ESG, in a post-pandemic world:
Could you please let me know a little about Ansarada?
Ansarada is a SaaS platform used by some of the world’s top companies, advisors and governments to govern their information, data and processes in deals and transaction management, board management, compliance and procurement. The company was founded in 2005 in Australia and is headed by our CEO, Sam Riley.
We have since opened offices in Amsterdam, Chicago, London, Johannesburg and Sydney, with clients located across the world.
In August 2020, Ansarada merged with the company I founded, thedocyard. As another deal technology platform, the merger was a logical step for both companies and has allowed us to form a global SaaS company applicable for all dealmakers.
What role does Ansarada play in the deal making process?
I was a corporate lawyer before setting up thedocyard, and became increasingly frustrated with the lack of software options available when preparing for an M&A transaction.
The cornerstone technology to a transaction was the data room – a secure virtual space that enables companies about to undergo a complex event or transaction, like a merger or fundraising, gather all relevant data and files in one secure location.
Today, Ansarada has an end-to-end transaction management platform. It enables the processes of performing due diligence, legal compliance, writing contracts and other tasks to go more smoothly and also lets companies track who accesses which documents, giving businesses a more comprehensive oversight throughout the deal process. We utilise the latest technologies such as AI and machine learning which allows users to significantly reduce costs and time with deal reporting and self-sorting documents. Since our inception we have worked with some of the world’s biggest names including VMWare, Microsoft, Deloitte and KPMG.
What does the second half of 2022 look like for the UK M&A market?
The past two years have been far from the norm in the M&A space with the pandemic resulting in a surplus of stricken assets, coupled with an initial lull in deal activity which has since picked up exponentially. Since then, the number of deals has exploded and we expect to see more M&A transactions than ever this year. KPMG has estimated that global deals will total $6trillion by year end. It is too early to see how the market reacts to the current geo-political situation ongoing in Eastern Europe, but with appetite unlikely to wane, new markets and sectors are likely to see increased activity as dealmakers’ attention shifts away from those markets.
This activity shows no sign of slowing down. Equity and debt markets are sturdy, low-cost capital is readily available, and there is plenty of capital chasing deals. As a result, all signs are pointing to 2022 continuing with this trend and being another bumper year for the market.
This was also seen in current investor sentiment. At Ansarada, we recently polled senior dealmakers from 50 UK-based firms across investment banking, private equity, and M&A. The survey findings showed us that 90 per cent of respondents believe that the number of M&A deals in the UK will increase in the next 12 months, including 54 per cent who believe it will increase significantly.
We have seen ESG requirements influence a number of markets recently, how much is this having an impact in M&A?
ESG is a term that is now synonymous in all aspects of financial markets and corporate activity. With November’s COP26 only further emphasising the role private capital has to play in the fight against climate change, this has now translated into the deal process.
Gone are the days of it merely being a box-ticking exercise – now participants on both sides of the deal are required to actively convey their credentials and highlight how they are conforming to new standards.
On the buy and sell side, dealmakers need to be aware of the ESG implications of transactions. On the sell-side, the ability to convey a clear ‘ESG story’ is paramount, whereas on the buy-side, dealmakers must be able to offer a credible ESG offering to clients. This increased focus on ESG issues has led to additional due diligence on deals. Along with financial, operational and commercial considerations, ESG has become a critical component of the deal process. In our recent survey we found that 58 per cent of executives said that ESG would become a ”significantly more important’ factor for parties as they contemplate mergers and acquisitions.
Companies involved in fossil fuels and other non-renewable areas are unlikely to see interest or activity from the market and this will only diminish as time moves on. As discussed, it is an optimum time for the M&A market, but it will only be those businesses who are able to actively demonstrate their ESG credentials who will benefit from increased appetite from dealmakers as well as the subsequent lofty valuations.