Strategic Diligence and Value Creation in M&A

Strategic diligence in M&A involves making informed decisions based on a solid thesis and opportunity assessment rather than following arbitrary signals. It is essential to differentiate between strategic diligence and confirmatory diligence, where the former involves understanding the strategic rationale behind a deal while the latter focuses on mitigating risks and liabilities through thorough due diligence. Value creation in M&A is driven primarily by making the right strategic bets and decisions, contributing to around two-thirds of value creation, while deal execution plays a crucial but secondary role. Successful M&A deals involve placing strategic bets effectively, ensuring proper deal execution, and sometimes leveraging execution strategies like structural multiple arbitrage for enhanced returns.