Sign-to-close: Accelerating value creation in the most challenging phase of complex mergers 2
The time between the signing and the closing of an M&A
deal has been lengthening-by quite some distance.
Investors and management teams have traditionally focused
on the pre-signing, due diligence phase and the post-close
first 100 days; but the growing interval between them can
endanger the realization of deal value.
The recent case of Microsoft's proposed $69-billion
acquisition of Activision Blizzard demonstrates the
current, complex regulatory environment-especially in
cross-border deals where merger control clearances need
to be secured in multiple jurisdictions. The situation can
create a strategic kind of limbo: when businesses must
operate independently yet risk significant value erosion in
the deal thesis due to delays in strategic decision-making.
During this limbo period, the potential risk of value erosion
increases, the longer that key business decisions get
delayed-for example, a delay in strategic investments
for product research and development until regulatory
clearance is achieved. Also, key talent becomes a flight
risk the longer the inertia continues, and competitive
agitation can further exacerbate the situation. As such,
investors and management teams often hold back on their
detailed synergy planning (particularly where involving
sharing confidential information), due to understandable
concerns over merger control clearance (called gun
jumping), delaying their ability to drive value creation
planning (VCP) earlier and faster in the process. Therefore,
using the limbo period effectively becomes critical to
accelerating the investment thesis and driving rapid value
creation post-close.
More stringent merger control has been one cause of
the increase, with increased regulatory scrutiny driving
extended sign-to-close periods and a range of deals subject
to regulatory investigation and approval also increasing. On
average, the durations of significant U.S. antitrust merger
investigations and European Union phase II cases have
risen by 90% and 47%, respectively.
The period between signing and
closing has increased by more than
30% in the past decade, and it is
continuing to grow. In the U.K., the
average number of days between
announcement and closing of public
deals reached 165 days in 2022-an
increase of 36% since 2019.
(Actum Group, 2023)
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Sign-to-close: Accelerating value creation in the most challenging phase of complex mergers