A board's duty to maximize shareholder value is an expected value calculation. A $100B offer with a 75% chance of closing is valued at $75B, making an $80B offer with 100% certainty more attractive. Boards weigh financing and regulatory risks heavily against the headline price.

In Italy, the role of deal sourcing for mid-market companies has shifted from investment banks to law firms. Entrepreneurs now approach law firms first to explore a sale. These firms then discreetly connect them with potential buyers and advisors, acting as a less expensive, conflict-free starting point.

In a competitive M&A process where the target is reluctant, a marginal price increase may not work. A winning strategy can be to 'overpay' significantly. This makes the offer financially indefensible for the board to reject and immediately ends the bidding process, guaranteeing the acquisition.

The first question in any fundraising or M&A discussion is always, 'What was your last round price?' An inflated number creates psychological friction and can halt negotiations before they begin. Founders should optimize for a valuation that allows for a clear up-round, not just the highest price today.

In Italy, acquiring a business's assets doesn't grant the buyer the right to terminate existing employees due to redundancy. Labor laws are extremely strict and pro-employee. Buyers must often negotiate with trade unions pre-deal and commit to retention periods, as preserving jobs is a key concern for Italian sellers.

For many Italian owner-founders, ensuring the well-being of their long-term employees is paramount, sometimes outweighing the highest bid. In one case, a seller presented three potential buyers to his employees and let them hold a referendum to choose the acquirer, ultimately accepting a lower offer based on their preference.

Contrary to fears of a frothy market, current M&A and LBO activity is more conservative than the 2007 era. A key difference is that today's deals involve a substantially higher amount of equity contribution from buyers, making them structurally less risky than those seen before the financial crisis.

To maintain pricing discipline, Fairfax has a strict M&A rule: it never participates in auctions or bidding wars. Once an offer is made, it's final. This strategy prevents them from overpaying and ensures they only acquire companies at prices that offer attractive future returns.

To generate returns on a $10B acquisition, a PE firm needs a $25B exit, which often means an IPO. They must underwrite this IPO at a discount to public comps, despite having paid a 30% premium to acquire the company, creating a significant initial value gap to overcome from day one.