Saturday, August 25, 2012

RICHARD REKHI, CEO & HEAD OF ADVISORY, KPMG

In the future, Mergers and Acquisitions will remain crucial, but the emphasis will be on making sure these deals deliver the value investors were promised

During 2009, five industry sectors dominated M&A activity, accounting for a combined 69% of announced volume, according to Reuters. The financials sector was most active, with a 20% market share, while the energy & power and industrials sectors accounted for 16.9% and 11.8% of M&A activity, respectively. Healthcare, driven by pharmaceuticals and biotech, drove 10.7% of activity, while materials contributed 10.1%.

Two of the largest transactions of the year were in the healthcare/pharmaceuticals sector: Pfizer’s US$64.4 billion acquisition of Wyeth, and Merck’s US$45.7 billion acquisition of Schering Plough. Other notable deals were ExxonMobil’s US$40.6 billion acquisition of XTO Energy and Rio Tinto’s US$58 billion joint venture with BHP Billiton.

In the first quarter of 2010, worldwide M&A increased by 20.5% from first-quarter 2009 levels and was the strongest opening quarter for M&A since 2008. Emerging markets M&A recorded a 107.2% increase compared to the first quarter of 2009, and the highest volume since the second quarter of 2008.

Capturing Post Deal Synergies
Companies should also feel empowered to dispose of non-core assets to focus on the most promising and profitable areas of the business. Growth should never be an end in itself. The focus must be on sustainable, profitable growth that enhances the value of the business.

To conclude, the idea that cooperation is the new competition has already become something of a cliché. It would be more accurate to say that those who do not have the skills to cooperate and collaborate may find it harder to compete. In the future Mergers and Acquisitions will remain crucial, but the emphasis will be on making sure these deals deliver the value investors were promised.


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