The success of mergers and acquisitions often depends on the quality of communication established throughout the process. According to McKinsey, good quality merger and acquisition (M&A) communications play an important part in accelerating acquisition value. 

This article looks into the overall M&A communications discipline, lists the seven main components of an effective M&A communications plan, and provides recommendations for handling internal and external communications at each stage of the M&A process.

What is M&A communications?

M&A communications is the strategic process of regularly providing information related to an M&A transaction to all stakeholders, focusing primarily on employees from both sides. It covers the messaging around how the transaction is going at all stages: from pre-announcement planning to post-merger integration. 

How those involved approach M&A communication should be outlined in the M&A communication plan. 

An M&A communication plan (also called a “merger communication plan” or “acquisition communication plan,” depending on the deal type) is a detailed roadmap that outlines merger or acquisition strategies, timelines, actions, and other specifics for conveying critical information about a merger or acquisition to stakeholders. 

The key goal of an M&A communication plan is to keep internal and external stakeholders informed, aligned, and engaged. 

Why effective communication is essential during M&A

Insufficient M&A communication can drastically impact deal outcomes, leading to their failure. For instance, it can result in cultural clashes, making it impossible for two different organizations to unite. That’s why 60% of executives start conducting cultural assessments early in the due diligence process and make their results a decisive factor in initiating the deal. 

On the contrary, clear and regular communication helps boost M&A outcomes and leads to a successful deal.

Here are the main reasons why having a well-crafted merger communication plan is essential:

Key components of an M&A communication plan

An effective M&A communication plan typically consists of such components:

1. Objectives
2. Key stakeholders
3. M&A communications team
4. Key messages
5. Communication channels
6. Timeline
7. Feedback-gathering mechanisms

Further, we describe each of them in more detail. 

1. Objectives

A well-thought-out M&A communication plan defines what goals it seeks to achieve throughout the M&A process. 

Some objectives might include:

• Effectively communicate the merger to internal and external stakeholders
• Ensure business continuity
• Address potential employees’ concerns
• Maintain employee morale
• Engage employees in the integration process
• Protect customer relationships 

2. Key stakeholders

This part of the acquisition communications plan addresses the target audience: internal and external stakeholders.

3. M&A communications team

This section of an M&A communications plan describes the main roles and responsibilities on the M&A communication team. 

It might look like this:

Disclaimer: The table is just an illustration of what an M&A communications team might look like. In reality, its composition solely depends on factors such as company size, deal type, workforce capacity, etc. 

It’s worth noting that a dedicated M&A communications team is common for larger organizations. In smaller companies, the responsibility for M&A communications typically falls on the HR department.

4. Key messages

Here, you provide the main topics to communicate to stakeholders and the key messages to deliver throughout the M&A process. They may look something like this:

5. Communication channels

M&A communications planning should also include the breakdown of the main communication channels to use and their purposes. 

For instance:

6. Timeline

A merger or acquisition communications plan should also describe how communications should be held at each stage of the deal and integration process. The main stages are described below.

Pre-announcement

This is the strategic preparation stage. It involves the creation of all communication materials, crafting messaging, and identifying key stakeholders. It includes collaboration with legal, finance, and executive teams to align on messaging.

Key purpose of communication: To ensure readiness and develop consistent messaging that supports strategic objectives and addresses all stakeholder concerns.

Announcement day

This is when the official M&A transaction communication is reported to the public, employees, investors, customers, and other stakeholders. Information should be clear and factual, avoiding opinion, unsubstantiated claims, and hyperbole. 

Key purpose of communication: To create transparency and manage initial reactions by providing accurate information, maintaining trust, and setting the tone for the transition; to avoid speculation and reduce uncertainty

Day 1

This is the first day after the announcement. The M&A communication team delivers follow-up messages to reinforce key information and provide initial answers to stakeholder questions. Leaders engage with employees and address immediate concerns.

Key purpose of communication: To reassure and engage stakeholders right after the announcement, emphasizing stability, continuity, and a shared vision moving forward.

Post-announcement and pre-closing

In this stage, the M&A communications team ensures ongoing communication as the deal progresses through regulatory approvals and integration planning. Information sessions, town hall meetings, and regular updates are organized to manage expectations.

Key purpose of communication: To maintain momentum, address stakeholder queries, and build confidence in the integration process.

Closing day

This is the official closing of the deal, where final announcements are made and new leadership or organizational changes are introduced. It’s often marked by celebrations and further communications to mark the start of a new chapter.

Key purpose of communication: To signal the deal completion, highlight expected benefits, generating excitement and support for the company’s future.

Integration

During this phase, integration plans are put into action, and regular updates are provided to stakeholders on progress. Leaders work closely with teams to foster cultural alignment and address any operational challenges.

Key purpose of communication: To ensure a smooth transition, maintain morale, and encourage alignment with the new structure and goals.

7. Feedback-gathering mechanisms

The M&A communications plan should also detail how the new leadership will gather stakeholder feedback. Feedback is important for understanding how stakeholders react to the deal and its communications and for proactively addressing arising concerns. 

Here are some of the main methods for gathering feedback based on their target stakeholder group:

After receiving feedback, management should evaluate it, so the relevant teams can adjust M&A communications to deliver the required messages to stakeholders. 

Best practices for managing internal communications

Follow these recommendations to ensure transparent and effective M&A communication with internal stakeholders:

How to communicate with external stakeholders during M&A

This is the best practice for handling external communications:

Common mistakes to avoid in M&A communications

To manage the M&A communications process efficiently, try to avoid these common blunders:

Key takeaways

• M&A communications is the strategic process of providing information related to an M&A deal to all stakeholders, focusing primarily on employees from both sides. 
• The approach to M&A communications throughout the deal is outlined in an M&A communications plan.
• The main components of an M&A communications plan are objectives, key stakeholders, the M&A communications team, key messages, communication channels, timeline, and feedback-gathering mechanisms.

M&A activity in Italy is showing signs of recovery after a sluggish few years. In 2023, the trend of rising deal counts continued, with around 1,511 announced transactions—a 40% increase compared to 2020.

We spoke to Dr. Andrea Barbera, the Founder of ASB Consulting, a firm specializing in M&A transactions and corporate strategy, to discuss his career in financial services and his predictions for the sectors poised for the most investment in the coming years.

Q: How did you build your career in M&A advisory?

I’ve always wanted to be a chartered accountant, so I began my career at large audit firms, starting with Arthur Andersen and then Deloitte. After gaining valuable experience in auditing and earning my professional qualification, I joined a mid-sized firm in Padua where I focused on ongoing corporate and tax consulting for businesses.

After a few years, I decided to branch out on my own, working on specific projects and leveraging relationships with partners from audit firms to conduct due diligence during company acquisitions.

I then founded my own consulting firm, offering corporate and tax services. Recognizing an opportunity in the market, I shifted my focus to international clients, particularly those with foreign companies wanting to trade in Italy and needing to open a branch or register for VAT to operate here. We’ve been acquiring larger clients, including multinationals and well-established groups, at a rate of about two new clients per month, and we’re still expanding. 

I also maintained my role as an advisory consultant in merger and acquisition operations, assisting both buy-side and sell-side transactions for industrial companies and real estate deals.

Q: How do you compete with other M&A advisories?

I work with both foreign and domestic clients, focusing on structuring deals to maximize tax and operational benefits, managing due diligence, and drafting essential agreements.

I’ve handled these processes well thanks to the skills I’ve built over the years. Finance and M&A activities require a deep and broad understanding of corporate and tax dynamics, along with advanced skills in asset valuation, budget planning and business planning.

Three years ago, I decided to combine my services with other specializations, such as VAT issues, fiscal representation, and corporate consulting for foreign companies. As a small firm aiming to deliver high-quality services, I can’t compete directly with larger international firms, but I’ve found some valuable niches.

I positioned myself as a medium-sized firm working with companies that have a turnover below €50 million. Many smaller companies that rely on a local accountant with a single office often lack a solid approach to handling major, unusual operations. This is usually because their accountant has only dealt with these situations a few times, given their rarity. 

So my potential clients are companies with turnovers ranging from €5 million up to €40 million, which often don’t have the knowledge or experience to manage generational transitions or take advantage of significant acquisition opportunities.

Q: Which sectors in the Italian market do you think will receive the most investment in the coming years?

Right now, I’m very focused on the opportunities tied to the PNRR (Italy’s National Recovery and Resilience Plan), which is allowing Italy—and the entire system—to benefit from a huge amount of funding, including grants that don’t need to be repaid. 

For example, here in Padua, a city known for its university since 1222, there’s a recurring issue with the shortage of student housing. This has attracted significant attention not only from the local administration but also from major institutional investors. They’re focusing on Padua more than other Italian cities for various reasons, and one incentive here is a grant of €20,000 per bed, defined by the Ministry of Universities and Research and funded by the PNRR. 

So, if a developer plans a €20 million investment to build a 400-bed student residence, they could receive €8 million in non-repayable funds, available immediately by June 30, 2026. This makes anything the government has included in the PNRR likely to see rapid growth in the next few years.

As for business or industrial sectors that may develop in the coming years, food is an obvious one for Italy. This includes all areas of food production—like pasta, bakery goods, or meat processing—and the companies that support them, such as packaging manufacturers. 

I don’t see much growth in clothing production, though established brands are likely to expand. 

We’re all aware of the current crisis in the automotive sector. It doesn’t look like there’s a quick fix on the horizon, which will impact the entire supply chain. In contrast, sectors related to software and technology are likely to keep growing steadily and deliver good results over time.

Q. The energy sector is attracting significant investment. Does this reflect what you’re seeing?

The energy sector is an interesting one, because high costs create barriers to entry. This is where government incentives come in, including those from past administrations, and now we’re seeing even more momentum, especially with the rise of renewable energy communities—a hot topic that banks are heavily supporting.

The sector has received substantial funding, and I wonder whether it would have grown as much without incentives. For example, the installation of photovoltaic panels has been popular for about 20 years, with ups and downs, as well as high-efficiency condensing boilers, storage batteries, and other modern amenities.

When it comes to actual energy production, it’ll be interesting to see how renewable energy communities evolve over time. There’s also a lot of focus on them right now, and significant funds are being allocated by banks for these activities at very favorable rates. 

So, we have a perfect mix of conditions at the moment, including good financial terms, supportive government policies, and the contributions I mentioned earlier. These combined factors can mobilize large amounts of capital.

A merger or acquisition must be well-planned to proceed efficiently. And planning starts early in the acquisition process, long before the purchase agreement is signed. 

A rushed pre-merger phase and lack of proper planning can see major roadblocks missed that may ultimately lead to deal failure. For instance, a failure to plan was one of the reasons behind the infamous Daimler-Benz and Chrysler Corporation merger breakdown in 1998. Two companies lacked strategic alignment, which led to catastrophic operational inefficiencies.

This article covers the pre-merger process, focusing on the importance of developing the right acquisition strategies and early integration planning. Read on to learn how to build a strong pre-merger acquisition strategy, using our step-by-step checklist.

What is a pre-merger strategy?

A pre-merger strategy is the foundational planning phase of the M&A process. Its aim is to assess the potential of integrating two companies. 

This stage is essential because it helps evaluate whether the companies involved share certain strategic objectives and understand how their combination could realize synergies in the future. 

A pre-merger integration strategy should also explain how the prospective combined new company will operate, ensuring alignment between both organizations’ goals, cultures, systems, and processes. In other words, a pre-merger strategy is about assessing the potential of a post-merger integration.

By starting the planning process early, the companies involved can understand whether the proposed deal has a chance of success.  It also proactively addresses possible challenges, such as issues with cultural integration or workforce alignment, both of which are critical for a smooth transition and successful merger.

Strategic focus in pre-merger planning

The main objective of pre-merger planning is to understand whether the sell-side and buy-side of the M&A process align on their strategic goals.  

Here’s what  pre-merger planning typically includes:

Communication strategies for pre-merger success

Clear communication is a critical driver of change management in M&A integration for almost 60% of deal-makers. More and more are rolling out change management programs early in the deal execution, long before the due diligence starts. 

This proves the importance of transparent communication in the early stages of the M&A preparation process, particularly, during the pre-merger phase. 

Here are the main recommendations for establishing effective communication among all stakeholders involved.

Explain objectives and rationale

Before entering into a merger or acquisition, you should communicate the strategic reasons behind the decision. This clarity helps employees understand the need for the deal, reducing uncertainty and potential resistance. This is crucial since a merger or acquisition can negatively impact employees’ perception of alignment, decision-making, and motivation. 

To mitigate such a risk, leadership can organize a series of presentations explaining the deal’s strategic goals. By articulating how it aligns with the company’s vision, employees are more likely to support the initiative.

Create a comprehensive communication plan

To establish effective communication pre-merger, you should clearly outline its aspects in the M&A communication plan. 

A pre-merger communication plan should include details on who will communicate what, when, and through which channels. This ensures that messaging is consistent and timely across all levels of the organization.

Use multiple communication channels

To reach different employee groups and make sure everyone has access to the information they need, employ different communication channels.

For instance, you could use email newsletters to provide regular updates and town hall meetings to discuss the company’s rationale for entering the deal.

Foster two-way communication

Feedback is important at all stages of the M&A process. Getting constructive comments from stakeholders can positively impact decision-making. 

Moreover, encouraging feedback and questions creates an atmosphere where employees feel heard. This approach not only reduces anxiety but also enhances engagement. 

Engage managers as communication leaders

Managers and team leaders can provide support and address employee concerns directly, ensuring that information about a potential deal is effectively shared.

That’s why it’s recommended to roll out training sessions for managers on how to communicate the deal. It can equip them with the tools to address concerns and keep their teams informed. 

An example of a pre-merger checklist 

Building a pre-merger strategy requires a knowledgeable and fastidious approach so as not to miss anything that could affect the potential deal’s success. 

We recommend creating a detailed checklist that outlines the main tasks of the pre-merger stage and ensures that no critical issues are overlooked.

Below is an example of the tasks to include in a pre-merger checklist.

Key takeaways

• A pre-merger strategy is the foundational planning phase of the M&A process that helps evaluate whether the buyer and the seller share their strategic objectives and understand how their combination can help realize synergies.
• The main components of pre-merger planning typically include defining strategic objectives, target selection criteria, alignment of leadership vision, market analysis, cultural integration strategy, financial evaluation, risk assessment, and post-merger integration planning.
• Timely, proactive, and transparent communication is a critical part of the pre-merger strategy’s success.
• A pre-merger checklist outlines the main tasks to complete during the pre-merger phase. Some areas to include are strategic assessment, initial due diligence, financial evaluation, legal considerations, risk assessment, integration planning, and communication strategy.

The years since 2020 have posed significant challenges to dealmakers, the extent of which is only just starting to be understood. Not only have M&A values declined sharply, reaching a 10-year low by the third quarter of 2023, but the time required to complete deals has also increased.

New research from Ideals VDR shows that deals closing in the first half of 2024 had taken on average 258 days. That’s a third longer than in 2020, when the average duration was 195 days. 

We spoke to Julien Spanneut, M&A and Investment Analyst at Luminus, about the factors that might be driving the increase in deal timelines – from rising interest rates to a heightened focus on Environmental, Social, and Governance (ESG) criteria. 

Q: What have you observed about the current state of the M&A market in Europe, and how is it impacting your company?

A: Our focus is primarily on opportunities within the Belgian energy sector, but we’ve noticed that the market is better; we’ve seen increased volumes in the first half of this year compared to the last semester of the previous year. But levels are still lower than what we experienced before COVID-19, say four or five years ago. Interest rates are playing a role in that, making it harder to benefit from favorable financial conditions.

It is clear, though, that the market is recovering and we’re hoping interest rates will come down soon. We hoped it would happen this summer, but it hasn’t quite materialized as expected. If a decrease happens, it could help relaunch the market.

Q: How do you quantify a “better market”? What does that look like for your business?

A: I was mainly speaking about increased transaction volumes. These don’t have such a significant impact on our operations, because we primarily engage in small M&A deals, financed mostly with our own equity rather than bank loans. So, our acquisitions are less heavily influenced by bank conditions.

On a regular basis, though, we’re involved in large energy projects, such as financing of power plants and large-scale battery projects for huge capex amounts. These are affected by market conditions, interest rates, and the appetite of financial partners, like private equity funds. Even though higher rates increase the demands for returns from these partners, we still see interest from them. 

The recent figures on inflation in Europe and the announcement from the FED in the US should however lead to further decreases in interest rates in the short to mid-term.

Q: The renewable energy sector has strong momentum, do you think this will persist over the next two years? Do any challenges lie ahead?

A: You’re right – the energy market has remained highly active in recent years. This is partly due to European Union initiatives encouraging investments in renewables, which have been further intensified by the crisis related to Russia and Ukraine, and the surge in gas prices. 

Government subsidies and support for renewable energy investments have also played a significant role in sustaining market opportunities. These subsidies, such as the Capacity Remuneration Mechanism or Contract for Difference, make it financially viable to invest in renewable assets, and they’re contributing to a positive outlook for the sector.

I think this trend is likely to continue. For example, there’s an upcoming auction in Belgium next year for 700 megawatts of offshore wind turbines in the North Sea. This project is expected to attract significant interest from large energy players.

Similar opportunities are likely in other European markets, such as France and Germany, where there are also substantial developments in offshore wind and other renewable assets. Our sector has huge potential for growth – lots of opportunities are yet to be explored.

Q: New data shows that deals are now taking 30% longer to close compared to five years ago. In your experience, which aspects of due diligence are currently taking the longest? 

A: I haven’t noticed a significant increase in deal duration, but I can see how various factors could contribute to longer timelines. Over the past two years, financing conditions have become more challenging. Until 2021, securing financing was generally easier, but banks have become more cautious. 

With the current rates, it is getting more difficult to respect certain requested levels of debt service coverage ratios [DSCR – ensuring that cash flows meet sufficient levels compared to the debt reimbursements and interests], and this can complicate financing and contribute to delays in project completion.

Q:  Have you found that buyers are being more cautious about what they are purchasing or spending more time evaluating assets?

A: We’ve noticed that some have increased their return expectations on investments, as the financing conditions have become stricter. This can lead to extended discussions, potentially slowing down the process. 

Q: Finally, research shows that ESG regulations and considerations are making due diligence take longer. Has ESG become a more prominent factor in your deals?

A: Permit approvals, which are partially driven by ESG considerations, are one aspect among multiple others that can impact deal timelines. When developing a project, you often start without all the necessary permits. But as the project progresses, obtaining these permits becomes critical. These aspects can delay the closing of deals, because you need to secure the necessary permits before finalizing financing. 

While global M&A activity hasn’t fully recovered after the slowdown started in 2022, dealmakers see positive signs that it might rebound in 2025. 

Even though the global transaction volume in the first half of 2024 fell 25% compared to the same period in 2023, deal value grew by 5%.

Amidst those positive signals and cautious expectations for the M&A market, we wanted to look at the core objectives of M&A deals to learn what dealmakers aim to achieve by initiating a transaction.

So what are the reasons for a merger and acquisition? Find the answers in this article.

Primary reasons for a merger or acquisition

Let’s first review the primary reasons why companies merge or acquire other organizations. 

Growth

The most obvious reason for a merger or acquisition is growth.

M&A is one of the fastest ways for an acquiring company and a target company to scale their operations. Instead of spending years building new infrastructure or expanding organically, a company can instantly double or triple in size or scale of operations by merging with another company. 

Such an acquisition or merger can significantly boost companies’ development. It allows them to expand rapidly and access new markets, customer bases, and distribution channels. 

Synergies

Realized synergies are the goal for most M&A deals. Simply put, synergies are the benefits or advantages companies can achieve from the transaction. There are two main types of synergies:

Apart from the main types of synergies, there are also financial and operating synergies. Financial synergy results from the improved financial efficiency of the merged company (for example, a reduction in the cost of capital). Operational synergy is about the improvement of operational activities (for instance, when merged companies achieve economies of scale).

Market expansion

Merging with a company in a different region or industry can provide access to new markets, and therefore increase market share. This is often more efficient than trying to enter those markets independently, since this way an acquiring company can quickly gain access to the target’s customer base without the need to win those customers autonomously.

However, it’s not always about new market expansion. The same corresponds to vertical mergers where a product manufacturer, for instance, acquires distribution companies to consolidate operations, get control over supply chains, and access a bigger market share.

An example of a market extension merger could be the 2018 deal between Vodafone and Idea Cellular in India. It was driven by the need to strengthen Vodafone’s presence in India’s growing telecom market, helping Vodafone access millions of new customers without having to build a new infrastructure from scratch.

Diversification

Mergers and acquisitions are often helpful for companies that plan to diversify their product lines and enter new markets. 

Diversification can stabilize a company’s revenue by spreading its business across different industries, which may not be affected by the same economic changes. 

A good example here is a conglomerate merger between Amazon and Whole Foods in 2017. This deal helped Amazon to expand beyond just e-commerce and cloud services. It gave Amazon a physical retail presence and access to the growing organic food market, reducing its dependence on online sales and opening up new opportunities.

Secondary strategic motives for mergers and acquisitions

Apart from primary motives for M&A, there are also secondary reasons for a merger or acquisition, which are still no less important. Let’s review them.

New technologies

Getting access to new technologies helps companies boost their operations, especially in technology-driven industries such as IT or healthcare.

Developing new technologies in-house can be costly, time-consuming, and risky. Instead, companies acquire firms with proprietary technologies to integrate them into their existing business. 

For instance, access to new technologies was one of the reasons for Google’s acquisition of Nest Labs in 2014. This deal helped Google gain access to smart home technology, which it then incorporated into its broader strategy for connected devices. This allowed Google to stay competitive in the emerging Internet of Things (IoT) market.

Talent acquisition

Sometimes the key motive behind a deal is talent acquisition. It’s especially relevant in industries where skilled employees and innovative leadership are in high demand, such as tech. 

Acquiring another company can be the fastest way to bring on new talent. And there’s even a dedicated term to this, ‘acqui-hiring’, which basically can be explained as “acquiring another company primarily to absorb its talent”. 

The acqui-hiring approach is often associated with Meta (previously known as Facebook) which had acquired such big tech companies as Instagram and WhatsApp.

Facebook has not once bought a company for the company itself. We buy companies to get excellent people.

Mark Zuckerberg
CEO of Meta

Competitive advantage

A merger or acquisition can also be a strategic move to outpace competitors by gaining access to resources or capabilities that set the company apart. By merging, businesses can achieve a stronger position in their market through increased size, brand recognition, or by gaining exclusive access to key assets.

This is often the case with a horizontal merger that occurs when companies operating in the same or similar industry combine their operations.

Improved financial strength

An M&A deal can strengthen a company’s balance sheet, allowing it to better manage market fluctuations and economic downturns. 

Mergers and acquisitions often result in pooled resources, reduced costs, and stronger financial backing, which can improve credit ratings and lower borrowing costs. 

Tax benefits

Companies sometimes get involved in M&A because of the potential to reduce overall tax liability.

By merging, organizations may be able to combine their tax strategies to lower the amount of taxes they owe. For example, if one company has losses, these can be used to offset the profits of the other, reducing the combined company’s taxable income. 

Additionally, merging companies can sometimes move operations to regions with lower taxes, further decreasing their tax liability. This can free up more cash for investment or growth, making the merger financially attractive.

How to assess if a merger is right for your company

A merger or acquisition can accelerate a company’s growth, but it can also introduce challenges. That’s why a structured approach that addresses both strategic fit and potential risks is important. 

When assessing whether a merger or acquisition is right for your company, consider these aspects:

The table below introduces examples of questions to ask yourself when considering a merger or acquisition:

Key takeaways

• The motives for mergers and acquisitions can be divided into primary and secondary.
• Among the primary reasons two or more companies combine their operations are growth, synergies, market expansion, and diversification.
• Secondary reasons for M&A typically include access to new technologies, talent acquisition, competitive advantage, improved financial health, and tax benefits.

As M&A activity rebounds from the recent downturn, trends such as AI and changing valuation standards are reshaping the landscape. Eastern Europe, in particular, is drawing increased attention from global investors, positioning it as a strategic player in sectors like software-as-a-service (SaaS) and IT services. 

To explore these developments further, we spoke to Filip Drazdou, an M&A advisor at Aventis Advisors. He shared his perspectives on the latest market trends, the impact of AI on deal-making, and the shifting global focus toward Central and Eastern Europe.

Q. First of all, please can you tell us about your role as an M&A advisor at Aventis?

We’re technology M&A advisors. We work with founders of businesses when they want to sell, and buyers looking for acquisition targets. We’re based in Warsaw, but we’re growing through partnerships in the United States and India. 

I’ve been at Aventis for five years now, working on transactions and driving research on valuations and IT services.

Q. There were predictions that M&A activity would pick up this year, but the data suggests it’s still quite flat. How does it look from your perspective? 

The market is certainly better than last year. The value of mega deals doesn’t match what we saw in 2021, especially in the technology space. But in terms of deal numbers, the market is definitely picking up. 

Transactions peaked during the Covid era of 2020-21, when monetary policy was loose and interest rates were low. Then there was a big decline. Now we’re recovering; AI has had a big influence on stock market activity, investors are enthusiastic again, and the markets are at an all-time high. 

We’re seeing more buyers interested in deals, and founders who delayed the sale of their business are coming back to the market and saying, “OK, let’s do it now.”

Q. Aventis frequently publishes analysis on M&A valuations. What have you learned from recent data? 

The biggest public companies in the US have stabilized around six or seven times their median revenue valuation. We have a bigger sample of SaaS companies around the world, including smaller ones, and there we see two to four times revenue, but that’s also stabilized. 

Valuations are not going anywhere. As revenue grew, there was a slight decline, but that also meant that companies were able to stay profitable or improve their margins. They’re back to normal levels now.

Q. What do you think will be the big tech trends for next year?

One to watch is the IT services market. During Covid everyone invested in digitalization, because we had to facilitate remote working, which meant building new software quickly. This came to a halt and all the new website app building stopped. 

We’re expecting a comeback soon, with AI driving another wave. 

Q. How does that feed into M&A? Are companies spending more on development and want to acquire companies that can do it for them? Or are those companies thriving so they become better targets for acquisition?

I think the latter. Because founders are still saying it’s not the right time for them; they’ve had a decline in revenue or profits, or laid off staff. And we recommend our clients should only sell when they’re growing. 

Growth rates are a big part of valuations, so when they’re up again, we think there will be an uptick in M&A in that space.

Q. Are there any other areas where you know Eastern Europe is particularly strong that you’re focusing on next year?

Eastern Europe is attracting more interest because the Western European markets are saturated and have a lot of capital. When fewer companies are available, valuations go up, because PE funds and strategic investors are going for companies with the same criteria. 

Investors are wondering if they can apply the same strategy to Central Eastern Europe and do, for example, a roll-up play, where they acquire a number of companies or just acquire some larger companies in the spaces that weren’t previously attracting investors. 

And the parliamentary elections last year made Poland more favored internationally. 

Q. In terms of foreign investment, are there any particular regions looking at Poland and Eastern Europe more than others?

Most investors are from the US, because of its technology and the size of its PE ecosystem, and Germany. I think investments from Germany will accelerate because of the troubles in the automotive segment. Companies will need to cut costs to remain competitive with Chinese manufacturers, so outsourcing to Poland through an acquisition could cut costs while maintaining a stable European supply chain. 

Automotive components, metalworking, manufacturing—-those are the segments that will see more activity in the coming years.

Q. Are sellers putting an artificial intelligence (AI) strategy in place to make them more attractive to potential buyers?

Yes, especially in the technology segment. You need to have an AI story in terms of how you can generate more revenue, but also in terms of reducing costs and improving customer experience. 

Are you implementing GitHub copilot in your development? Or are you using AI in your customer support? Sometimes it’s more about having a defensive narrative: explaining to investors why AI will not damage the business and it will still be viable in five years. 

Q. Are you finding that buyers only look at companies that are built with AI, or that have a clear AI differentiator? 

We haven’t yet seen AI playing a major role in any buyer’s acquisition strategy. For many AI products or services, the business model isn’t quite there yet, so a lot of buyers are either skeptical or reluctant to make it the core of their strategy. 

But this will change in the coming years. For example, the US real estate company Zillow recently acquired a virtual staging application – where you have an empty room, and you can furnish it with AI. Next year, big corporations will be following suit, looking at what acquisitions they need to make to accelerate their AI roadmap.

Q. From your own perspective at Aventis, are you using any AI tools to simplify the M&A process?

We’re testing APIs like Perplexity, an AI search tool, to speed up tedious tasks such as working out where companies are located, how many employees they have, their revenue and if they are for sale. For light financial analysis, tools like ChatGPT can be helpful. 

Over time, the role of an M&A advisor will become more about building relationships with buyers and sellers, and helping them navigate the sale journey. Because it’s not just about the technical and financial aspects; for many people, it’s personal. 

They’ve spent 20 years building a business and now they have to sell it—and that can be emotional.