Insights on financial services M&A June 2020

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Differentiated diligence after COVID-19

As dealmaking resumes, private equity and other buyers have an opportunity to earn outsized returns—as was the case on well-timed transactions after the 2008-09 recession. But finding value will require differentiated diligence. As in the last recession, there will be many smaller, messier deals—distressed assets and carve-outs. Finding “diamonds in the rough” will be even harder this time because of the economic disruption caused by the COVID-19 lockdown, which makes it exceedingly difficult to find true value in a sea of noisy data.

This makes the use of advanced diligence techniques essential. In this paper, we share six techniques that will need to be emphasized even more in the post COVID-19 deal world. These techniques help dealmakers gather intelligence that routine diligence can’t provide by seeing beyond reported numbers and expert insights to discover true sources of value (and barriers to value capture). Players that use differentiated diligence after COVID-19 can hope to match or exceed the returns that top players achieved after the last recession.

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