MERGERS & ACQUISITIONS TOWER PERRINS RESTRUCTURING
Asia - Companies that are still investing in mergers and acquisition deals during the downturn are outperforming their competitors by 6.3%.
According to analysis by global professional services firm Towers Perrin and the UK's Cass Business School, the more a company completes mergers and acquisitions (M&A), "the better its performance". Called the "Brave Acquirers", their transactions brought in negative shareholder return of 25.4% on average, compared to the rest of the global market's 31.7%. In Asia itself, companies which completed M&A deals quickly with robust due diligence performed 7.6% above the market.
Steve Allan, Towers Perrin's Asia M&A head believes the economic downturn gave companies across Asia the opportunity to "come out of their shell". This is in stark contrast when previously mergers in Japan could take up to two years for completion or Chinese companies jumping into overseas deals without sufficient due diligence. Allan says that often made integration activities "extremely difficult" and "destroying value" in the acquiring process.
Companies which acquired within their own country borders outperformed their industry peers by 7.7% while acquisitions done across borders only outperformed by 4.0%. M&A deals in the healthcare sector gave the highest shareholder return in all industries, followed by the technology and energy sectors, 9.3% and 7.3% respectively. Results were based on 204 deals worth more than US$100 million which were completed between 15 September 2008, after the collapse of Lehman Brothers, and 31 May 2009.
However Marco Boschetti, Towers Perrin's head of global M&A and restructuring says companies still need a robust execution capability if they want to sustain "market outperformance beyond the downturn". To maximise return on investment from M&A deals, Boschetti recommends that companies should:
- Continue to be diligent about due diligence. Avoid jumping into a transaction because the price appears low is irresponsible and can be hugely damaging.
- Focus on integration execution. Ensure the organisation's focus is on areas of critical value such as leadership, culture, total rewards, communications, workforce deployment, selection and staffing.
- Use the relative quiet period between M&A activity to build M&A capabilities and train employees for the next transaction. Being prepared pays off in speed and quality of execution.
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