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Signs of the Times – M&A Best Practices, Resilience and SPACs

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Private Equity Insights - April 2021

In today’s complex mergers and acquisitions environment, even the most successful private equity firms must continuously stay up to task when it comes to building their M&A capabilities. Intense competition, increased regulatory scrutiny and rising litigation risks are just a few reasons private equity firms and portfolio companies must invest in the right talent, processes and tools to support deal-making and avoid costly pitfalls. Strategic planning is particularly crucial, whether making business decisions around M&A or a public offering. As a result of the COVID-19 pandemic, FP&A functions have accelerated their shift in focus from tactical activities to providing enhanced analytics and insights to support critical business decisions such as public offerings.

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In this issue, we share recently published articles (with links to the content) on M&A best practices and strategic planning, insights that will help dealmakers as M&A activity heats up. Our data download puts a spotlight on special purpose acquisition companies (SPACs) and key first-quarter 2021 trends. SPACs continue to roil the IPO market and are attracting regulatory attention. Also highlighted are Protiviti’s industry-leading views on operational resilience and our take on the GameStop saga and what it means for fintechs and their private equity backers.

Ready to Strike a Deal? Five Best Practices to Ensure Repeatable Success in M&A Transactions

Global M&A activity increased 93% to $1.3 trillion in the first quarter of 2021, making it the biggest opening quarter in recorded history. Private equity funds are front and center in this deal-making frenzy, having shown their resiliency during the pandemic and turbulent economic landscape last year.
With some market participants concerned about the increasingly speculative market activity, now is the time for dealmakers to exercise strong due diligence and ensure that their M&A capabilities are up to task. Protiviti’s M&A and transaction services experts share five best practices they recommend all companies consider as soon as, or even before they have identified a target.

  • Click here to learn about these M&A best practices

Operational Resilience: New Principles and Proposals Issued, Setting Regulators’ Expectations

The flood of regulatory activities around operational resilience should be catching everyone’s attention, especially participants in the private equity arena. In late March, U.K. supervisory authorities issued a series of policy statements to both refine and finalize their approach to operational resilience for U.K. financial services firms. Almost concurrent with the release of these policy statements, the Basel Committee on Banking Supervision (BCBS) also issued its principles for operational resilience. Together, the BCBS principles and the U.K. supervisory authorities’ policy statements represent the most detailed regulatory thinking to date on the topic of resilience.

PE firms and portfolio companies should begin to allocate the necessary resources to address what is becoming not just a U.K. mandate, but a global one as well. Protiviti has published a series of thought leadership on how firms can enhance their resilience. Click on the links below to access these insights and our industry-leading operational resilience framework:

Number of Global SPACs Brought to Market Year to Date – 2021

258 (as of March 5)

Number of Global SPACs Brought to Market in Full Year – 2020

256

Global SPAC IPO Proceeds

$76.7 billion (as of March 5)

SPACs vs. IPO

  • $60.2 billion – U.S. SPAC issuance year to date (as of end of February 2021)
  • $24.3 billion – U.S. IPO issuance year to date (as of end of February 2021)
  • 137.6% – increase in total deal value of U.S. SPAC issuance in February 2021 over previous month
  • 61.5% – increase in total deal value of U.S. IPO issuance in February 2021 over previous month

Sources: Refinitiv, SIFMA

For more on SPACs, read our insights on the Securities and Exchange Commission’s latest effort to allow de-SPAC companies (this term describes the SPAC acquisition/merger route of going public) an internal controls reporting outcome similar to that of companies that take the regular, non-SPAC IPO route – and what it means for your firm.

 

COVID-19 Fuels FP&A’s Expanding Role in Real-Time Strategic Planning

The increasing pace of change, fueled by the COVID-19 pandemic, has forced a shift in the traditional FP&A model of planning and analyzing financial statements. FP&A functions are increasingly providing enhanced analytics and insights to support critical business decisions.

As the SPACs-driven IPO market heats up, access to FP&A teams with enhanced capabilities will be increasingly critical for private equity firms and private companies considering public offerings. With the right FP&A partner, companies will be able to leverage real-time business intelligence and analytics, for critical activities such as scenario planning to anticipate risks and understand projected outcomes or implications of critical business decisions.

FP&A’s expanding role in strategic planning is the subject of this article from Protiviti’s business performance improvement experts.

  • Read this insightful piece here

GameStop Saga Exposes Trading Flaws, Reveals Huge Opportunity for a “Disruptor”

Fairly or unfairly, private equity firms, hedge funds, and investment companies that are generally off-limits to retail investors are facing the wrath of lawmakers and regulators in the wake of the GameStop saga. Much has been written about the flaws exposed by the January 2021 trading frenzy surrounding GameStop and other meme stocks, events which exposed substantive questions about market volatility and the implications of distributed investing, as well as firm and liquidity settlement procedures.

While the crisis raised many legitimate concerns, it has unveiled an opportunity that has not received much attention: specifically, the need for a fintech disruptor to be created to reduce inefficiencies and enable near real-time settlement. Private equity industry, which continues to play an outsized role in the fintech revolution, should take note.

  • Click here to read more about how a disruptor can help reduce trade settlement inefficiencies and to learn practical tips that can help firms minimize these issues

We Are Here to Help

These are just a few areas of expertise in which Protiviti professionals excel. Private equity firms that need additional assistance or insight should not hesitate to seek guidance in these unprecedented and challenging times.

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