For those who can, now is the time for snapping up distressed assets, and even rivals, that were once out of reach. The global economic downturn has created more opportunities for M&A activity in 2009, as Andy Tinlin, Executive Partner and Head of UK Corporate Strategy Practice for Accenture explains
"The current turmoil is a potential opportunity for strong players to improve their market position, both by selective acquisitions of competitively priced assets, and also the selective divestment of assets that may no longer be core to their business."
But in a market where most business leaders are struggling to secure funding, not to mention buy-in from their shareholders, how can we overcome the constraints of the credit crunch and take advantage of declining equity values? John Plender, Chairman for Quintain Estates and Development plc and FT columnist, recognises the huge difficulties in identifying the right acquisition or merger for the strategic priorities of the business. He says "All the evidence tells us that few companies manage to pull off the M&A trick successfully...companies should beware the siren voices of the investment bankers, who are bent on earning fees from any deal rather than the right deal."
Done correctly though, M&A in the current climate presents significant advantages to business success. As Abbas Hussain, President, International Emerging Markets for GlaxoSmithKline
explains "as part of our emerging market growth strategy, we're looking for inorganic growth opportunities to significantly enhance our scale, portfolio and footprint. In the current crisis, considerable opportunities exist for cash-rich companies to leverage their balance sheet and pick up assets that are fundamentally good businesses but struggling. However, due diligence is key. You should be absolutely clear that the acquired business will do better in your hands than with its current management."Clive Ansell, Senior Advisor for Royal Mail
, reiterates Abbas' enthusiaum for M&A activity this year: "Great prices and greater flexibility in structure and terms; people keener than ever to receive offers; a wider selection of opportunities; a more positive view from workforces. These all make it easier to get just the right strategic move set up in just the right way." However, he also emphasises the importance of having "a longer-term view, clear insight into your industry and where it's going and experience to create a deal that really will deliver value all round."
Clearly, M&A also offers companies the chance to extend into growth industries which they may have found more difficult in previous economies. Daisuke Ishida of Mitsui & Co (Europe) comments: "We will continue to be cautious in assessing investment opportunities in 2009, focusing on areas of strategic interest to the business. We see healthcare, recycling technologies and BPO as interesting potential areas to deploy capital, but deals will take longer to close and prices need to continue to adjust to reflect the lack of leverage available." M&A Opportunities Events
To help you with the challenges of M&A in the downturn, Criticaleye has a breakfast Forum on 22 April entitled Strategies for the Downturn: Effective Mergers and Acquisitions
. At this debate, a panel of expert speakers will explore the opportunities for M&A in the downturn and how lower prices are enabling acquisitive companies to make bolder strategic plays and gain market positions they wouldn't previously have had the resources to fund. Please click on the event title to read a full description and register your interest in attending. M&A Opportunities Events
We also have a number of interesting Insights
to guide leaders through the M&A process at this time. Mergers and Acquisistions in a Downturn: "Buying Low" Can Be A Major Driver of High Perfromance,
offers best practice advice to companies looking to take advantage of the economic environment and acquire for success. Management Retention Programmes During Major Ownership Transactions
provides advice on retaining your best people through the acquisition process and how organisations should establish a management retention programme. Click on either title to go directly to these papers.Matthew Blagg, CEO, Criticaleye