Is your portfolio fit for the future or fashioned on the past?
I’m glad to say the story hasn’t changed much since October. M&A appetite remains high. Now, more than half of our respondents are planning to complete a deal over the next year and 86% believe the M&A market will get hotter in the next 12 months.
Video: Steve Krouskos - global M&A to continue at pace
So, maybe more of the same isn’t a bad thing. Who would have predicted a record first quarter, in spite of a much more aggressive antitrust regulatory environment and continued weakness in Chinese outbound activity (which is largely driven by more aggressive regulatory frameworks)?
Despite this challenging backdrop, we did have a record first quarter and our survey respondents expect a strong market to continue. Don’t misunderstand me, I’m not saying I expect a record year for M&A —largely because of the challenges mentioned above. However, this is shaping up to be a very good year for deal activity.
We are squarely in the era of portfolio transformation. Barriers to entry are shrinking in most industries as technology advances and traditional industry structures blur. Seventy percent of our respondents view portfolio transformation as the top item on their boardroom agenda."
Why? Well, there are a few contributing factors we will analyze in this report. First and foremost, we are squarely in the era of portfolio transformation. Barriers to entry are shrinking in most industries as technology advances and traditional industry structures blur.
Seventy percent of our respondents view portfolio transformation as the top item on their boardroom agenda. Companies are now in the regular rhythm of selling assets in order to raise capital to invest in the right technologies and sector adjacencies.
Key takeaways that help drive better M&A in today’s deal economy
Is your portfolio fit for purpose?
Buying and selling can be the fastest way to transform your portfolio and reshape the future direction of your business. Being able to proactively respond quickly to emerging opportunities — and threats — is a must in the warp-speed world of business today.
Can you strategically manage your own ecosystem or will the external environment manage you?
The pace of convergence and disruption is compelling companies to look across a broader landscape to understand their relative competitive position. Companies should recognize the new realities of today’s markets and develop new ecosystems to spot future growth opportunities — and identify emerging threats.
Are you utilizing tomorrow’s technologies today?
Technology is a transformer. The increasing use of AI, RPA and big data is revolutionizing the way boards assess and optimize their operations — and encouraging them to make bold decisions on what to buy and sell to gain prime market position. Companies need to be certain their strategic decision-making processes enable them to take advantage of emerging technologies.
Can your deal strategy navigate the rules or will regulation rule your M&A?
The growth imperative means companies will remain focused on accessing new markets or acquiring innovation. An early understanding of regulatory implications in terms of how you shape the deal — such as subsequent asset sales to meet competition/antitrust requirements — could give you a competitive advantage.
Is your future success contingent on your workforce?
With record levels of employment in many leading economies, the war for talent has never been fiercer. The right skills are often in short supply. Reskilling existing workers or hiring contingent workers are options. Using M&A to secure talent is another and executives should be sure that integration strategies secure the most value from human capital.
Are you actively managing your stakeholders?
Shareholder activists can be viewed as strategic advisors and their investment is often a sign of potential value. Executives should engage with activists and look to leverage value-creating insights and points of view.
Is private equity a competitor or a collaborator?
Private equity funds are investing more and more for the medium and long term. They are also returning to the M&A market with significant purchasing power. Corporate executives should be prepared for increased competition for assets — or be open to collaborating with PE on deals, especially when acquired assets may need to be divested to execute the deal.
Does the answer to your growth question lay beyond your national borders?
Notwithstanding rising nationalism and protectionism, companies are planning more cross-border deals than ever before. Executives should remain alert to opportunities outside their domestic market and be prepared to reimagine their global footprint.
Is walking away the best deal you ever made?
The deal landscape is highly competitive and the competition looks set to intensify further. But executives are making shrewd judgments based on strategic rationale supported by better information. Today, the use of new tools and technologies to assess available data from multiple sources will determine deal fitness.
Global Vice Chair
Transaction Advisory Services
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Download global report (PDF) Press release: Global M&A appetite remains healthy despite geopolitical uncertainty