Clearly, while numerous researches show that M&As destroy shareholder value, these failed deals show one aspect that is unique to downturn, which is that acquirers can get quite circumspect about the prospects of the acquisition. Harsh Vardhan, Partner and Director, BCG India, elaborates on why this goes in favour of downturn M&As in an exclusive interaction with B&E, “Boom time mergers carry greater risk, since firms may tend to overpay and even get more casual about the strategic logic.”
That’s one side of the story, however. Where you find CEOs with a pair of scissors, you will also find CEOs with fishing lines, and preparing their baits. For it is also true that while the acquirers get into thinking mode, they also know that there are easy pickings on the other side of the fence, as valuations get depressed. A research done by BCG and UBS investment banking asked CEOs and senior managers of 164 public listed firms in Europe about their M&A plans for 2009, just six weeks after the Lehman collapse. It revealed interesting insights. A majority (51%) had no intention of changing their M&A plans and only 15% felt that doing deals was too risky at the moment. More interestingly, 43% of the companies felt that there will be transformational deals in the near future. Obviously, since debt (due to credit crunch) and equity (due to stocks plummetting in value) are not as potent as they used to be, cash is expected to be king. A number of sectors are expected to witness heightened M&A activity in 2009. Comments Stefan Zehle, CEO, Coleago Consulting Ltd. exclusively to B&E, “The issue is quite simple, take advantage of forced sales. Many sales that are now coming up are ‘fire sales’ where the seller desperately seeks cash because they can’t roll over loans.”
Banking and financial services is the one that is most likely to have top of mind recall, since that was where it all started. In the US, we know how the government has committed some $243.7 billion to banks and insurance firms in the US, which makes us wonder where else could under-performance be so deeply rewarding!
That’s one side of the story, however. Where you find CEOs with a pair of scissors, you will also find CEOs with fishing lines, and preparing their baits. For it is also true that while the acquirers get into thinking mode, they also know that there are easy pickings on the other side of the fence, as valuations get depressed. A research done by BCG and UBS investment banking asked CEOs and senior managers of 164 public listed firms in Europe about their M&A plans for 2009, just six weeks after the Lehman collapse. It revealed interesting insights. A majority (51%) had no intention of changing their M&A plans and only 15% felt that doing deals was too risky at the moment. More interestingly, 43% of the companies felt that there will be transformational deals in the near future. Obviously, since debt (due to credit crunch) and equity (due to stocks plummetting in value) are not as potent as they used to be, cash is expected to be king. A number of sectors are expected to witness heightened M&A activity in 2009. Comments Stefan Zehle, CEO, Coleago Consulting Ltd. exclusively to B&E, “The issue is quite simple, take advantage of forced sales. Many sales that are now coming up are ‘fire sales’ where the seller desperately seeks cash because they can’t roll over loans.”
Banking and financial services is the one that is most likely to have top of mind recall, since that was where it all started. In the US, we know how the government has committed some $243.7 billion to banks and insurance firms in the US, which makes us wonder where else could under-performance be so deeply rewarding!
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