webinar: 2017 state of m&a

2017 State of M&ARethinking Diligence and Integration Processes to Improve M&A Outcomes

July 18th, 2017

© 2017 Axiom Global Inc. - CONFIDENTIAL

2 Presenter introductions

2017 State of M&A

Liz WayOperations Director, Legal & ComplianceChange Healthcare

Conor MillerSVP, M&A Diligence &Integration Services

Axiom


3

2017 State of M&A

Webinar agenda

An overview of The Deal Machine research

The current state of M&A globally and key reasons deals fail

How companies can evolve diligence and integration to drive value and outcomes

Insights into how Change Healthcare has streamlined due diligence and integration practices


4 Why Axiom commissioned the 2017 State of M&A survey

2017 State of M&A

Industry research shows that 70-90% of M&As don’t achieve intended deal ROI. Axiom commissioned this report to understand why and explore ways companies can set up deals for success and achieve synergies.

Our hypothesis was that most companies:

▪ Lack a standardized approach to M&A which meant that they “reinvent the wheel” each time they have a new deal

▪ Could use diligence more strategically to create transparency and get ready for Day 1

▪ Can build on diligence gains and accelerate integrations with standardized processes and tech

▪ Will want to create a “Deal Machine” if they are pursuing a serial acquisition strategy


5 The Deal Machine: M&A 2017 survey overview

2017 State of M&A

Survey Demographics 300 global M&A professionals. 47% M&A teams / 53% commercial 80% from North America / 11% from UK/Ireland, and 10% from Europe

Corporate Revenues ($1Bn to 16Bn) 79% - annual revenues of >%16Bn.

Top 5 Industries Consumer and industrial products (27%) Other (26%) Tech/New Media/Telecom (17%) Financial Services/Insurance/Banking (12%) Energy/Commodities (11%)


6 Current state of M&A globally

2017 State of M&A

The Year of the Strategic Deal

Source: MergerMarket, JPMorgan Source: CNBC

2016

3rd highest year since 2007

1 in 3 deals crossed borders

2 in 3 deals were paid for in cash

2017

$678.6B in corporate transactions for Q1

# of deals down 17.9%

Overall deal value up 8.9%

The Year of the Mid-Market Cash Deal

The interdependence of diligence and integration


8 The diligence and integration dilemma

2017 State of M&A

8 in 10 say that deal value would increase if diligence is approached strategically.

However, 6 in 10 don’t know how to accomplish this goal.

Is there a better way to approach due diligence and integration?


9 A realization that “people-driven” M&A has limits

2017 State of M&A

People

Technology

Process

Which area of operational capacity in the deal lifecycle would teams most benefit from improving on/optimizing further?

Most survey participants did up to two deals a year

35% of companies with an annual revenue >$16Bn did 3-6 deals a year

Companies see process and technology as the greatest opportunity for optimizing M&A diligence and integration

2 out of 3 companies doing 3-6 deals a year were focused on both to stand up a Deal Machine


10 Current deal processes are costly and inconsistent2017 State of M&A

(very) LARGE INVESTMENT

Inefficient, manual process with expensive people and heavy time investment

LITTLE RETURN

Unhelpful answers to the wrong questionsInconsistent and unstructured output with

little to ZERO value

RETURNINVESTMENT

“We actually stopped asking our law firms to perform due diligence memos. We spent so much money on them, and yet nobody ever used them.”

– In House Client, F200 Company


11 Role of legal ops in a new era of deal making

2017 State of M&A

Early involvement with the due diligence team and identify stakeholders as early as possible

Engage industry experts to strategize and partner with on collection and review activities

Strategic focus on all aspects of the organization involved in the transaction - not just M&A, IP, Employment, Regulatory

Implement technology to transform the organization to a gold-standard, high efficiency and high productivity organization

Invest in human capital in the organization


12 Needed: A new diligence and integration strategy

2017 State of M&A

GCs at major deal makers want to harness the full potential of due diligence and integration. They identified the following process improvements as key to achieving deal success:

Across all deals, all three improvements hold equal weight.

However, for serial deal makers doing 10+ deals Standardized processes take on more importance, followed by those that generate consistent output.

Standardized processes, including playbook, workflow, templates, etc.

Processes that align to internal business strategy and enable consistent output

Leveraging post deal best practices

Types of improved processes that would most help in-house teams with achieving deal success

From analysis to action: The importance of data outputs


14 Diligence and integration output must evolve to meet M&A imperatives

2017 State of M&A

Currently, just 1 in 5 companies feels that diligence output is very effective for M&A and commercial teams

Top 3 most useful things to receive during due diligence and/or integration according to the market survey:

Operating on the integration side, how effective do you consider the input from due diligence teams to be to achieving expected synergies?

Operating on the due diligence side, how effective do you consider your output to be to the downstream teams?

Very effectiveExpected synergiesalways achieved

Somewhat effectiveExpected synergiesoccasionally achieved

NeutralExpected synergiesnot often achievedbut process issatisfactory

Very effectiveData-driven insight thatundoubtedly enhancesthe integration process

Somewhat effectiveUseful insight thatsomewhat enhancesthe integration stage

NeutralThe due diligenceprocess is consistentand timely, but we donot normally use adata-driven process


15 How Change Healthcare is using data

2017 State of M&A

Companies are evolving from legal memos to technology enabled actionable insights

Only 1 in 4 respondents find traditional due diligence memos that summarize key contract provisions valuable

Created database to support decision-making related to contract disposition/assignments among entities.

Using current data to plan future state: Implement gold-standard technologies to automate and manage:

Contract Lifecycle Management (CLM) Legal Billing Legal Holds Processing

Process and technology: Helping people drive to insight


17 Technology can help achieve process and data goals

2017 State of M&A

Once companies have done the work of standardizing and aligning processes, they can reap the benefits of technology.

Here are the improvements deal makers want:

80% of companies doing 10+ deals a year want to achieve enterprise targets through data alignment and output.


18

Q&A

2017 State of M&A

Thank You

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