Legal departments should expect M&A deals to take longer

Legal departments should expect M&A deals to take longer
It’s taking longer to close mergers and acquisitions according to research and advisory firm Gartner.

In an analysis of 23,000 deals, its Legal and Compliance Practice found that M&A deals in 2019 take an average of 38 days now, 31% longer than in 2010. And it says that legal departments need to adapt as a result.

“Organizations increasingly rely on M&A to drive value, which means a greater volume of deals for legal departments to manage,” said Abbott Martin, vice president and research leader for Gartner’s Legal practice. “The complexity of deals has also risen with their volume. Legal departments need new strategies for managing the associated costs while delivering due diligence and deal support in a timely manner.”

The research found that about 75% of companies rely on in-house attorneys to draft legal documents associated with the preliminary stages of M&A transactions, including letters of intent and nondisclosure agreements.

“While outside expertise is necessary for certain types of transactions, in-house teams must ensure that the deal actually achieves the desired synergies. The in-house team is best positioned to understand corporate operations and is critical to deal execution and long-term value capture,” said Martin.

Gartner says that legal departments should increase their in-house legal capacity; create agile deal teams; strengthen cyber protections; focus on processes, decision making, and culture; and clarify the deal narrative with all communications to stakeholders focusing on the rationale.