Hello, what external factors mostly affect the Strategy and Transaction service line especially transaction diligence?

Hi Steffi,

Thanks for the question! I'm a second year analyst in transaction diligence, and can say that there are numerous external factors that affect the work we do. I've spoken about three in detail below: economic factors, long term market trends and structural changes.

Firstly, economic factors, which I think is particularly impactful to transaction diligence specifically. If you take the audit service line for example, companies are often legally required to be audited every year, therefore economic factors are far less likely to have an impact on audit as a service line. This is not the case with transactions, as there is no requirement to buy, sell, refinance etc., therefore transactions (and thus our work) tend to occur cyclically with the economic cycle. For example, due to the current high inflation in the UK, we've seen some uncertainty in the market which has led to some potential projects being delayed or scrapped. Anything that causes market uncertainty, such as inflation, Brexit, the global pandemic, commodity prices or more recently the situation in Ukraine, will inevitably cause businesses and investors to take a more cautious outlook - or the opposite in the case of positive factors such as economic growth. As economic factors change constantly and rapidly, this is probably the largest external factor impacting our work.

Longer term market trends also affect the work we do through how they affect the clients we work with. I've worked on a few tech deals, which going back a few years would've been far less frequent. There is more of a focus on sustainability at the moment, so we are likely to do more work for e-corps or businesses who are focusing more on sustainable practices than before. These types of trends are longer term in nature and so tend to happen over an extended period of time, so the rate at which this type of factor would affect our work is far less intense than economic factors for example.

There are also external, structural changes to the way transactions are performed that affect our work. For example, transactions using a locked box date are more popular now than in the past, where completion accounts were the norm. I won't get into detail here (it'd take ages!) but basically these are just two different completion methods for determining the equity value of a business. The point of mentioning this is to show that we have to perform different types of work depending on which of these methods is used, so as one becomes more popular, we do more around that one. If a new method was introduced, we would need to adapt our approach again. As with market trends, this type of change is few and far between and tends to be adopted over time rather than overnight, however it does have a large impact on the work we do.

This is far from a definitive list, and I've tried to talk about factors that I think are not as obvious or not as generally applicable to all service lines such as competitors, new technology and regulatory/legal changes to name a few. I hope this answer helps and feel free to reply if you have any further questions :)