Business
More haste, less speed – completing deals against the clock
Global Banking & Finance Review®
Company
Claire Van der Zant, Chief Growth Officer, Shieldpay
Claire Van der Zant, Chief Growth Officer, Shieldpay
By Claire Van der Zant, Chief Growth Officer, Shieldpay
The last few years have seen interest rates peak and inflation climb as geopolitical and macroeconomic uncertainties have weighed on markets and the financial sector around the world. While uncertainty still abounds, there has been some uptick in confidence, with data indicating merger and acquisition activity is up 20% on last year.
As a result of many businesses having looked to bide their time and watch the markets over the last eighteen months, there is now a lot of ‘dry powder’ out there – cash earmarked for investment but currently unallocated. In fact, according to S&P, there could be up to $2.62 trillion of total uncommitted capital sat on business books globally. So, 2025 could be a bumper year for M&A as business confidence returns.
In the United Kingdom, this dynamic is being given further impetus by the new government’s forthcoming Autumn Statement. Many are expecting the Chancellor of the Exchequer to use this much heralded first ‘fiscal event’ to increase capital gains tax (CGT). Given this, many are rushing to complete deals now, to beat the new tax.
All of which means, the pressure is on to get deals done – especially but not only – in the UK.
This is good news for the economy and for business but, getting deals done at speed cannot come at the expense of getting the deal done right. This means undertaking due diligence and gathering payment information on potentially hundreds of parties to the deal, ensuring the smooth and timely transaction of significant financial sums to parties in multiple jurisdictions and currencies and managing the daily fluctuations of the currency markets as they relate to these sums.
This brings a great deal of complexity. However, throughout an M&A process the focus is often, understandably, on the deal itself and on the subsequent integration of two (or more) previously independent businesses. This can mean the logistics of the transaction and the complexities it brings are often an afterthought.
Failing to plan for and manage this complexity can have significant consequences however ranging from reputational damage to regulatory breaches. In the worst case scenario misplaced or late payments could cause significant ill will or even void the deal. So, overlooking the details of how a payment will be processed is not something that deal makers can afford.
Following a number of high-profile cases of client money going missing – in particular the case of Axiom Ince – the UK’s legal regulator the SRA has been taking a tough line on any breaches when it comes to KYC or AML regulation. This leaves little room for error regardless of any pressure that might be being exerted to ‘get the deal done’ before the Autumn Statement.
So, how can dealmakers move quickly while also staying compliant and ensuring payments go smoothly across multiple parties, currencies and jurisdictions?
A surprising number of businesses and legal advisors still rely on antiquated methods such as spreadsheets and emails for tracking KYC checks and storing payment information. Subject as they are to version control issues, human error and crashes, such methods are very much a twentieth century solution to a twenty-first century problem.
Thankfully, technology and innovation are bringing more efficient means of closing a deal to the fore. Payments tech is making it easier for businesses to automate regulatory checks and payments while remaining responsive to the twists and turns of a complex M&A transaction.
Another part of the solution here is the perennial one of planning. When it comes to managing the complexities of due diligence and payment distribution, planning early is essential. Having lawyers and payment providers in the process upstream helps ensure a robust plan for fund distribution is in place. Crucially, early planning also avoids the final hours of a deal turning into a stressful, last minute scramble that leaves parties with negative feelings about the process.
With just weeks to go until a possible substantial hike in CGT, it’s understandable that many will be looking to close deals sooner rather than later especially as prices come down due to increased supply into the M&A market. The risk of missing the Autumn Statement deadline however should be balanced against the reputational, regulatory and legal risks that could follow from overlooking due diligence or badly managing a payments process.
The good news is that payment and regtech innovation means undertaking AML, KYC and payment logistics is quicker, easier and less prone to human error than it used to be. Firms looking to close this autumn and stay compliant need to start planning and onboarding payments partners now, to iron out these details in deals early on.
Due diligence is the process of investigating and evaluating a potential investment or acquisition to confirm all material facts and financial information before finalizing a deal.
Compliance in finance refers to the process of ensuring that financial institutions adhere to laws, regulations, and guidelines set by governing bodies to prevent fraud and maintain integrity.
Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations, or their operating units are transferred or combined.
KYC, or Know Your Customer, is a process used by financial institutions to verify the identity of their clients to prevent fraud and ensure compliance with regulations.
AML, or Anti-Money Laundering, refers to laws and regulations designed to prevent the practice of generating income through illegal actions.
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