Cross-border M&A
The recent financial crisis rattled markets, but also opened new doors for strategic investors. With premiums dropping, a new wave of mergers & acquisitions is highly likely. European businesses stand to profit.
While the financial crisis had many bankers in a tailspin, it has had a positive side effect for strategic investors, as it resulted in a cooling off of the overheated acquisition market. With premiums dropping this could spell a new wave of mergers and acquisitions, and the European market looks to be a strong target, as the current economic climate forces companies in the region to grow through mergers or acquisitions.
After a period of declining costs and a return to core activities in 2000 and 2001, European companies have been under an increasing pressure to internationalize over the past few years, to ensure high revenues and defend themselves from becoming acquisition targets themselves. That European companies have been excelling in the M&A field is supported by recent numbers: In 2006, the total value of European M&As was USD 1.59 trillion. Across the Atlantic, the figure was USD 1.54 trillion.
As part of its analysis surrounding the 'Best of European Business' competition in 2007, Roland Berger Strategy Consultants examined the M&A strategies of 8.000 businesses. The winners of the competition in the M&A category were emblematic of the success factors identified as part of this wider analysis.
The September issue of 'think:act CONTENT,' Roland Berger's single-issue executive magazine, takes a closer look at these five ingredients for successful M&A activity, offering a number of concrete examples taken from the breadth of the company's consulting experience.
Success factor 1: Timely development of inter-European networks
European companies traditionally have strong international and inter-European ties. They work closely with foreign companies and are therefore able to tap into new markets. Successful mergers are those in which the affiliated companies and their executives know each other well and are familiar with each other's business models and processes. This helps to assess both advantages and difficulties ahead of the actual integration phase.
While the financial crisis had many bankers in a tailspin, it has had a positive side effect for strategic investors, as it resulted in a cooling off of the overheated acquisition market. With premiums dropping this could spell a new wave of mergers and acquisitions, and the European market looks to be a strong target, as the current economic climate forces companies in the region to grow through mergers or acquisitions.
After a period of declining costs and a return to core activities in 2000 and 2001, European companies have been under an increasing pressure to internationalize over the past few years, to ensure high revenues and defend themselves from becoming acquisition targets themselves. That European companies have been excelling in the M&A field is supported by recent numbers: In 2006, the total value of European M&As was USD 1.59 trillion. Across the Atlantic, the figure was USD 1.54 trillion.
As part of its analysis surrounding the 'Best of European Business' competition in 2007, Roland Berger Strategy Consultants examined the M&A strategies of 8.000 businesses. The winners of the competition in the M&A category were emblematic of the success factors identified as part of this wider analysis.
The September issue of 'think:act CONTENT,' Roland Berger's single-issue executive magazine, takes a closer look at these five ingredients for successful M&A activity, offering a number of concrete examples taken from the breadth of the company's consulting experience.
Success factor 1: Timely development of inter-European networks
European companies traditionally have strong international and inter-European ties. They work closely with foreign companies and are therefore able to tap into new markets. Successful mergers are those in which the affiliated companies and their executives know each other well and are familiar with each other's business models and processes. This helps to assess both advantages and difficulties ahead of the actual integration phase.
Success factor 2: Professionalized M&A activities
The opening of Europe's borders and the deregulation in many industries has stepped up the competition significantly. Many European companies are already experienced in the cross-border M&A arena. The most successful among them will have professionalized their M&A activities by putting together complete teams of in-house experts who specialize in the integration process These experts ensure that the best elements of both companies are consolidated and the local strengths of each are leveraged. Companies frequently gain a wealth of knowledge through a number of smaller acquisitions and joint ventures that they can then apply to larger deals later. Stock exchanges reward these companies with higher stock prices, because the assumption is that experienced companies are more successful in integrating two companies and thus generating additional shareholder value.
Success factor 3: Using cultural diversity as an asset, not an obstacle
Cross-border mergers are often accompanied by a clash of cultures, languages and management styles. European companies are used to networking across regional borders and thus take cultural aspects into consideration when planning to launch a takeover bid. They excel in bringing both sides together as equal partners and maintaining transparency throughout the entire process. The most successful know how to use open communication to their best advantage, create synergies and working openly with employees of the acquisition target to avoid an exodus of managers, specialists and most importantly perhaps, customers.
The opening of Europe's borders and the deregulation in many industries has stepped up the competition significantly. Many European companies are already experienced in the cross-border M&A arena. The most successful among them will have professionalized their M&A activities by putting together complete teams of in-house experts who specialize in the integration process These experts ensure that the best elements of both companies are consolidated and the local strengths of each are leveraged. Companies frequently gain a wealth of knowledge through a number of smaller acquisitions and joint ventures that they can then apply to larger deals later. Stock exchanges reward these companies with higher stock prices, because the assumption is that experienced companies are more successful in integrating two companies and thus generating additional shareholder value.
Success factor 3: Using cultural diversity as an asset, not an obstacle
Cross-border mergers are often accompanied by a clash of cultures, languages and management styles. European companies are used to networking across regional borders and thus take cultural aspects into consideration when planning to launch a takeover bid. They excel in bringing both sides together as equal partners and maintaining transparency throughout the entire process. The most successful know how to use open communication to their best advantage, create synergies and working openly with employees of the acquisition target to avoid an exodus of managers, specialists and most importantly perhaps, customers.
Success factor 4: Making strategic use of regional differences
The understanding of cultural differences affects European companies not only in terms of the integration process, but also in terms of sales. Companies that succeed in M&A don't simply transfer existing products to new target markets without first testing their relevancy, marketing and sales approach. Smart buyers place a premium on the local knowledge the employees and the management of the acquisition target bring to the table and use it strategically to maintain and expand market share.
Success factor 5: The ability to navigate the European political landscape
Cross-border M&As in Europe face a number of regulatory obstacles. In addition, many mergers are stopped dead in their tracks because EU leaders play for national protectionism around Brussels'-based negotiation tables.Over time, European companies have learned to live with the latent protectionism that remains in Europe and know how to address legal obstacles that come with EU integration early in the process. Thus, they aim to chart a clear course of the acquisition before launching a bid. They have also realized that communicating the benefits of the deal for the target company can sway critical minds in high places. In this process, it particularly important to transparently and convincingly highlight the strategy for the merger toward the governments and general publics involved.
think:act CONTENT is published monthly by Roland Berger Strategy Consultants. To obtain a copy, please do not hesitate to contact us:
The understanding of cultural differences affects European companies not only in terms of the integration process, but also in terms of sales. Companies that succeed in M&A don't simply transfer existing products to new target markets without first testing their relevancy, marketing and sales approach. Smart buyers place a premium on the local knowledge the employees and the management of the acquisition target bring to the table and use it strategically to maintain and expand market share.
Success factor 5: The ability to navigate the European political landscape
Cross-border M&As in Europe face a number of regulatory obstacles. In addition, many mergers are stopped dead in their tracks because EU leaders play for national protectionism around Brussels'-based negotiation tables.Over time, European companies have learned to live with the latent protectionism that remains in Europe and know how to address legal obstacles that come with EU integration early in the process. Thus, they aim to chart a clear course of the acquisition before launching a bid. They have also realized that communicating the benefits of the deal for the target company can sway critical minds in high places. In this process, it particularly important to transparently and convincingly highlight the strategy for the merger toward the governments and general publics involved.
think:act CONTENT is published monthly by Roland Berger Strategy Consultants. To obtain a copy, please do not hesitate to contact us:
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