Where next for deals and due diligence in 2025?

Sponsored by A WORD FROM IDEALS Where next for deals and due diligence in 2025? After a period of subdued M&A activity, there is optimism that dealmakers should get ready for a busy year ahead. Deven Monga VP of sales for strategic accounts, We spoke to Sabine Schilg and Deven Monga from Ideals North America VDR, which supports thousands of global M&A deals each Ideals VDR year, to understand how their clients are preparing for A former investment banker, Deven is now a 2025 and the trends that are impacting due diligence. results-driven sales leader with more than 12 years of experience leading sales teams in How do you sum up the M&A market in 2024? What were the software-as-a-service, AI, and financial your biggest takeaways? technology (fintech) spaces. Deven: 2024 was defined by resilience amid uncertainty. Sabine Schilg Deal flow remained steady for our clients, particularly in the VP of customer success middle market, despite challenges such as higher interest Ideals VDR rates, inflation concerns, and geopolitical tensions. Strategic Sabine is an experienced business leader and acquirers and PE firms focused on value-driven transactions, board member, with an extensive background emphasizing synergies and operational improvements. in M&A. She has excelled in leading acquired technology startups and delivering A key takeaway for our customers has been the growing multimillion-dollar growth. importance of speed and efficiency as dealmakers seek to navigate complex economic conditions while Sabine: We know investors have plenty of money in the bank remaining competitive. to drive moderate growth this year. PE and VC funds have more than $2.5 trillion waiting to be deployed. Sabine: After a sluggish year, customer activity is already picking up in purposeful AI, life sciences, and in particular, If conditions remain positive, I would expect to see a further renewable energy. rebound as we move into the second half of the year. However, the threats of trade tariffs and the overheated It shows, as so often, that inflation and political uncertainties equity market should be monitored closely. along with leadership changes influence M&A tremendously. However, with a stabilization of interest rates and the US Which regulatory or policy changes related to M&A are you elections behind us, our customers are optimistic about deal watching most closely? activity in 2025. Deven: Regulatory scrutiny is intensifying around two key Looking at the year ahead, how do you expect the market areas, which only emphasizes the importance of due diligence to develop? and compliance. Deven: Cautious optimism should define the year ahead. If Firstly, the US government is imposing heightened oversight the US economy stays strong and we see further interest on foreign investments, especially in critical infrastructure, rate cuts, then dealmaking activity should rebound. David technology, and data-sensitive sectors. Committee on Foreign Solomon from Goldman Sachs recently said he expects deal Investment in the US (CFIUS) reviews have lengthened activity to potentially exceed 10-year averages in 2025. timelines and introduced additional complexity to cross- border deals. Middle-market transactions will likely continue to dominate, and I anticipate we will see an increase in carve-outs and More broadly, we are continuing to see the US Federal Trade divestitures as companies look to streamline operations and Commission and the US Department of Justice take an focus on core business areas. aggressive stance on mergers and acquisitions, particularly 21 2024 ANNUAL GLOBAL M&A REPORT A WORD FROM IDEALS

Sponsored by in concentrated industries such as technology, healthcare, Deven: Two major hurdles stand out. The first is cost and energy. This trend has prompted dealmakers to engage unpredictability with legacy VDR providers. Many clients have in more extensive pretransaction risk assessments and been frustrated by opaque pricing structures commonly used contingency planning. by our competitors, where back-end-loaded fees significantly inflate their costs. This lack of transparency creates budget Sabine: Taxes and tariffs are two areas I am watching closely. overruns and complicates deal planning. Tax reductions could lead to greater investment in the US, but there is a lot of discussion around economic growth and Similarly, legacy systems often lack the intuitive workflows the need to impose trade tariffs between the US, China, and and advanced security needed to execute modern M&A other territories. transactions efficiently. As deals grow in complexity, firms need solutions that combine speed, security, and user-friendly If this materializes, I expect to see even more stringent interfaces to meet their evolving needs. screening of cross-border investment, which will inevitably lead to some suppression of M&A activity and delays in Sabine: One of the most interesting trends we are seeing getting deals done in 2025. is in AI, which is having a big impact on the dealmaking process. Our customers are looking to gain advantages and Which aspects of due diligence have changed the most in reduce costs by embedding new AI tools for things such as the past year? risk assessments, but this brings its own risks in terms of misjudgments or data security. Deven: We work with the world’s biggest M&A advisors, and they consistently tell us that due diligence is becoming more Looking specifically at virtual data rooms, security and complex and fast-moving, so they are looking for ways to privacy remain the priorities for our customers, but they need digitalize and streamline the process. to be paired with practical uses of AI for things such as data redaction or document search. Buyers and sellers are prioritizing tools that enable them to collaborate more effectively while ensuring compliance We expect to see some regional differences here, with the US and data security. Legacy virtual data rooms (VDRs) leaning into AI, while some European countries remain more with convoluted, per-page pricing models have become a sensitive and restrictive. This will likely cause some additional frustration for many deal teams, leading to a shift toward technical hurdles in 2025. transparent, predictable pricing structures. Are there any sector-specific trends you are seeing in your Cybersecurity concerns have also become more prominent, work with customers? especially with the data breach Datasite experienced in July 2023. This has driven the adoption of platforms that Deven: We are seeing a lot of deal activity in the technology emphasize both security and efficiency. space at the moment, which is reflective of the market as a whole. Software, fintech and AI are driving a lot of interest, Sabine: From deal analysis using our VDR platform, we found and that will only continue in 2025. that average deal timelines have increased by 32% since 2020. That is an extra 63 days per deal. Elsewhere, our customers in life sciences have been active, particularly with advancements in precision medicine and Interest rates and the availability of capital inevitably play a digital health. However, the healthcare sector will likely face big role here, but we are also seeing other factors slow the regulatory challenges, with some US states looking less due diligence process, such as the focus on environmental, attractive for deal activity. social and governance; cybersecurity; and data privacy laws. These are familiar parts of the diligence process, but the focus Sabine: We expect to see strong activity among our on them is increasing. customers in the renewable energy sector. Firms around the world are pursuing decarbonization strategies, while What are the biggest technical hurdles your clients have had governments are offering regulatory support and incentives to to overcome when undertaking M&A? renewables investors. We are looking forward to supporting our energy sector customers with their M&A activity in 2025. 22 2024 ANNUAL GLOBAL M&A REPORT A WORD FROM IDEALS