M&A Evolution: strategies for the new deal landscape
10 October 2011Corporate Newsletter
Three years on from the collapse of Lehman and the global financial crisis, what is the future for M&A?
Ongoing concerns over global economic stability continue to challenge corporates seeking to grow through mergers and acquisitions.
To address these challenges and explore solutions and opportunities for driving successful M&A strategies, Hogan Lovells has been working with the Financial Times to produce a global report M&A Evolution: strategies for the new deal landscape. Over the summer detailed interviews were conducted with 160 board level executives and heads of M&A at FT Global 500 organisations around the world. Respondents were questioned on the growth strategy of their organisations and their views on a number of areas of interest to dealmakers, including regulation, valuation and funding, and how those views and strategies have changed post-crisis.
Preliminary findings from the research demonstrate that although the economic outlook remains uncertain, there are a number of reasons for optimism:
- Economic uncertainty is not impacting long-term growth strategy - economic uncertainly is still regarded as a major factor, with almost a quarter of respondents referring to its impact on the M&A market. Unsurprisingly, given recent events, European respondents are focused on the current debt crisis, although interestingly very few respondents in Asia see it as a problem. Despite this, any concern around the global economic landscape does not appear to be impacting on M&A strategy overall as one might expect. Sixty percent of respondents say that current economic, political and regulatory factors have had little or no impact on their M&A strategy
- Deal making is back on the agenda - the majority of respondents are considering a range of strategic options for growth, particularly core business growth through acquisition, international organic growth, growth via joint ventures/strategic alliances, and international growth through acquisition. The appetite for growth through outright acquisition is noticeably stronger in Europe and Asia than in the UK and US
- Cash is king - with strong cash balances following a period of relatively low spending, it comes as no surprise that cash on the balance sheet is the most favoured source of funding for deals in the next 12-24 months amongst those interviewed. This is especially the case for those in the US and Asia, who prefer using cash compared to other sources of finance such as bank loans and equity.
This is a short preview of the headline findings, which also cover other key areas including views on regulation, valuation and investment potential across geographic markets. The report with the complete analysis and findings will be officially launched in November and a more detailed update will be included in the November issue of this newsletter. In the meantime, to keep up to date with developments please follow us at www.hoganlovells.com/evolution and www.twitter.com/HLEvolution.