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21 Apr 2023
Insight
London
1. Understand your role
Your role is one of stewardship and ultimate decision making, rather than working the deal day to day –understand your basic duties as a director, be sensible and thoughtful, and apply your own skills and experience in steering and assessing a deal
2. Build a trusted team
An experience deal team, led by management and supported by quality advisers, should run the deal process day to day –fix milestone decision points to help the board monitor progress and be clear on reporting requirements (beware of data clutter on M&A transactions, and push for concise summaries)
3. Know the regulatory environment
Listed companies have ongoing compliance obligations under a wide range of rules –seek training on what rules are particularly relevant to M&A processes, and know your obligations in relation to the identification and control of inside information (as distinct from confidential information)
4. Be rigorous with due diligence
You do not want to buy a problem case or experience a “diligence fail” –make sure the deal team have rigorous due diligence processes in place to identify key risks and a clear plan on how any identified risks will be mitigated either through the deal terms or practically
5. Assess the ESG risks
The direction of travel on ESG is clear: businesses are being held to higher standards of corporate responsibility by a diverse collection of stakeholders. This cannot be ignored in M&A, and every transaction will have ESG considerations –ensure these are assessed and addressed as part of the deal team’s processes
6. Maintain objectivity
Is the company the “best owner” of the target business –ask difficult questions, test value, challenge management if a deal does not fit with the company's strategy or is not value creative, be aware of potential biases and don't be swayed by perceived rather than actual benefits
7. Plan for the unexpected
Merger control and FDI regulators have never been more numerous and proactive, blowing out deal timetables and increasing parties’ focus on completion risk –take time to understand the impact of any negative developments (in the market or the business) between signing and closing and how these are addressed in the deal documents
8. Take care over public documents
As directors, you are ultimately responsible for ensuring all public documents (including announcements) are accurate, fairly presented and not misleading –read them and check that they have been prepared with the highest standards of care and accuracy, and appropriately verified
9. Proactively engage with shareholders
Intervention in M&A is no longer limited to formal activist campaigns with many more investors making their views on deals publicly heard –understand your register and ensure there is a proactive and effective strategy in place to convince shareholders of the merits of a deal
10. Look beyond closing
Deals don't stop on closing, and successful transactions depend on proper post-deal integration –test that management have a detailed action plan in place and the resources to deliver it effectively in order to capture value/synergies fully
| Remember: public M&A is different and has additional rules – be prepared, know when i starts (on active consideration or approach) and get briefed on your specific responsibilities under the UK Takeover Code |
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