M&A – response or resilience?

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

14 minute read 14 Oct 2019

Prolonged upward M&A trend continues despite geopolitical, economic concerns as C-suite builds optionality into strategic decisions.

In today’s environment, it appears that the only certainty is uncertainty. The latest EY Global Capital Confidence Barometer finds executives dealing with numerous interconnected challenges and proactively managing them.

The strategic objective is clear — finding growth. But geopolitical risks, the recasting of trade and tariff rules, zigzagging monetary policy, technology and innovation, as well as evolving regulatory policies, offer obstacles. How best to navigate them?

Go for bespoke, not off-the-shelf: not all issues impact each company in the same way. Executives need to continually unlock and assess the impact of challenges — and the possibility of opportunities — for their business portfolio. Be prepared to recast long-held assumptions and follow a tailor-made path to future growth.

Keep options open: scenario planning and threat analysis enable business leaders to better highlight risks to current operations. Understanding their own ecosystem, their competitors’ ecosystems and the likely path of innovation will help companies make smart choices about what and when to buy and sell to create the portfolio fit for the future.

Buy for tomorrow today: the talent and technology that underpinned growth yesterday is not necessarily best suited to unlock growth tomorrow. With a shortage of technical and digital capabilities, executives need to continually reinvent their talent and technology strategies. In many cases, acquiring will be the fastest way to secure these in-demand assets.

Local Perspective IconA local perspective

Economic growth is slowing down somewhat in Belgium. What impact does this have on M&A?

The latest EY Global Capital Confidence Barometer shows that the Belgian economy is not growing as fast as it has been doing in the last few years. Because of this, Belgian companies are taking a more critical approach when it comes to M&A and they are returning, it would appear, to their core activities.Despite these observations, the fundamentals for new M&A deals are positive.

Read more

Local contact

Marc Cosaert
EY Belgium M&A Partner
  • Steve Krouskos talks global deals on CNBC

    Steve Krouskos, EY Global Vice Chair – Transaction Advisory Services, discusses the latest results from the 21st edition of the Global Capital Confidence Barometer on CNBC.

Understanding the route to growth: building optionality into strategic decisions

Executives are also navigating new societal rules for corporations. Creating long-term value beneficial to all stakeholder groups is becoming non-negotiable. Companies must be good corporate citizens, delivering value for all stakeholders. Those that find themselves on the wrong side of this argument will find themselves on the wrong side of history. They will lose customers and imperil future growth.

As ever, senior executives walk a fine line. But by understanding how prevailing uncertainties impact their business, building optionality into their strategy and buying the next wave of capabilities, they can plot a course to create long-term value for their company, stakeholders and society more broadly.

The critical questions executives should ask themselves to drive better M&A in today’s deal economy

1How can value be more than just a number?

The way companies are being viewed by society at large is changing. For executives, it can no longer be shareholders first and only. Executives should be able to communicate the wider human, societal, consumer and financial value their company creates for their wider stakeholder group and society as a whole.

2Can you measure your relevant economy?

GDP statistics provide an overarching view of the macro economy, but fully understanding your individualized economic ecosystem and addressable market can facilitate better capital and resource allocation to support sustainable long-term growth.

3Is digital more than a bit part?

The right digital transformation strategy should be at the heart of boardroom planning as the key to unlock growth opportunities in an increasingly virtual world.

4Can you predict your own future trade flows?

Understanding the future interplay between supply chains and market access can help executives better manage risk and accelerate opportunities for growth.

5Can you afford to walk away from the deal table?

With the pace of innovation unrelenting, to stay ahead of the curve, executives must finely judge the buy vs build argument and add a premium for speed to market. Walking away now could mean missing an opportunity that competitors will fully exploit — at your expense.

6Is your talent strategy fit for the future?

Understanding the skills, experiences and aspirational career models required for the future will help maintain an engaged and productive team of people, which can help drive growth. Re-equipping existing staff with new and broader skills while attracting and retaining high-caliber talent from outside can help underpin future growth.

Summary

The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.