Making a Success of an M&A Deal in a Recovering Market
Recent analysis from the Corporate Executive Board (CEB) in the UK has looked at some of the most important elements to consider when launching an M&A deal in today’s recovering market.
M&A activity is certainly increasing as firms all over the world focus on this strategy to help boost growth following the stagnant recession period. The pressure is on dealmakers to carry out mergers and acquisitions quickly and many are facing fresh challenges as a result of the recovering nature of the economies they are working in.
Two main goals are emerging among dealmakers looking to undertake M&A activity. Some are focusing on expanding into foreign, and often emerging, markets; while others are more interested in diversifying their business models with the acquisition of new or complementary approaches to business. Either way, executives are finding themselves facing these challenges more commonly than they would have prior to the recession.
Post-recession regulations are also much tighter and more demanding on businesses looking to undertake cross-border deals and, as a result, it has never been more vital to ensure these regulations and standards are fully understood before a deal gets underway.
In light of these new challenges, it is important to examine how dealmakers can ensure they stand the very best chance of completing a successful merger or acquisition deal. This is to say that the strategy delivers the value expected by executives in the initial stages of the deal.
The CEB claims that success depends upon first being able to maximise deal value, before expediting value capture. Maximising deal value is an element that needs to be considered before a decision is made on any merger or acquisition and is particularly relevant when moving in to emerging markets or carrying out cross-border deals of any kind.
Targets based in emerging markets may hold exciting prospects for innovation based on their very valuable expertise in their specific market. If being sold by a parent company, they may offer exceptional potential for expansion as their innovation could have been limited through the parent firm’s attempt to retain a sense of uniformity through the use of familiar processes. If such targets can be identified, they can represent fantastic deals.
When it comes to securing any identified value, one of the first priorities should be searching for the ideal team to lead the deal-making process. One of the team’s most important tasks will be to recognise signs that certain stakeholders are resistant to change or are close to walking away completely. Such situations need to be dealt with swiftly, through personalised communications assuring them of the importance of their involvement.
Perhaps most important of all is an emphasis on cultural alignment and integration, as without these challenges being fully considered during the due diligence process, a deal could end in failure. Risk mitigation is key here and any seemingly unquantifiable or abstract ‘risks’ - such as ‘culture’ - need to be attributed to measurable characteristics that will allow them to be monitored and controlled.
In conclusion, embarking on a merger or acquisition during a period of recovery holds its own unique challenges that mean firms have to consider risks and opportunities earlier than they may have traditionally. However, it is the time for opportunity, and if a buyer gets it right and takes the appropriate and necessary measures to successfully optimise value, the potential for growth is exceptional.