The current “hot streak” of record M&A (Mergers & Acquisitions) buzz seems to be going on and on. Sustained, strong deal activity appears to be the order of the day – and, furthermore, the sizes of recent transactions have been considerable, too.
Tapio Koivumäki from Operational M&A Advisory at Deloitte believes that the level of activity in M&A is poised to “remain strong”, although there are uncertainties in the global economy. “Corporations are seeking growth via acquisitions, there’s a lot of capital available and interest rates are on a low level,” he sums up.
Via these acquisitions, big corporations can gain totally new perspectives.”
Talking about various industries, Koivumäki feels that the infrastructure sector is likely to yield plenty of deals in the future – and big ones, too. “Given the size of your typical infra projects, it is clear that transactions are sizeable, as well.”
One strong trend is big, established companies going after innovative startups to improve their disruption edge. “Via these acquisitions, big corporations can gain totally new perspectives.”
Looking at the materialized deals, Koivumäki sees two different types of M&A activity in the field. “There are a lot of companies that pursue growth through acquisitions. Then there are traditional consolidations where one industry player goes out and acquires a competitor.”
Still, there’s little point in going shopping for the sheer thrill of it. Koivumäki points out that any and all M&A actions must be rooted in the company’s strategy: finding the right target is simply key here.
“Through analysis, one can find the targets that produce the required added value and potentially yield significant synergy benefits.” Especially, if a big merger is on the table, the role of synergies can easily ‘make or break’ the entire deal.
Eye on Integration
M&A processes can be tricky, but having committed people in key positions can win the day.”
But as due diligence is carried out and wheels set in motion, Koivumäki advises companies to move fast in the integration. “You need to proceed quickly according to the plan, since the integration process places a great strain on the company on the short term.”
In addition to speed, integration requires faithful “sticking to the playbook”. “A systematic approach, which utilizes the best practices available, delivers also the best results,” Koivumäki believes.
Also, as integration is performed by people, it makes sense to pay special attention to the human assets out there. Motivated people who are working towards common goals can achieve a great deal:
“M&A processes can be tricky under the best of circumstances, but having committed people in key positions can, ultimately, win the day.”
Clearing all the M&A hurdles is often more difficult than companies think. Jukka Luoma, Assistant Professor in Marketing for Aalto University School of Business, says that the executives in the buyer company are often so focused on pushing the deal through that they see little else.
The acquisition is likely to trigger some changes in the business environment.”
Luoma points out that as a company A acquires company B, company A may end up gaining access to, say, new kind of technology or new, lucrative markets – but it’s not likely that other industry players will break out in spontaneous applause due to this.
“The acquisition is likely to trigger some changes in the business environment, since the competitors have freedom to act as well,” Luoma says.
Both Sides of the Board
Luoma, a veteran of corporate ‘war game’ scenarios, comments that it is “quite remarkable” how executives can neglect taking the competition into account in the fog of M&A.
“That’s why we have integrated war games into M&A program at Aalto EE.” Walking a mile or two in the competition’s boots has proven a worthwhile exercise.
“We’ve had dozens of war game cases since 2015 and the feedback has been very positive,” Luoma says.
Aalto EE's Mergers and Acquisitions program gives you a structured understanding of the M&A process and equips you with the tools and skills you need for succeeding in each phase of the process. Read more about the program.