M&A Blog and News
Of course we all aspire to grow the revenues of our business, reduce costs, create customer loyalty and many other avenues to contribute value to our stakeholders. In order to do so, we secure the best vendors, employees and leaders who are educated, trained and experienced to create in-house competencies. So why is it that so many companies, even today, continue to see growth by M&A in a passive light? Why is it that so many company executives are given the arduous task of growing the business through acquisitions without a similar investment in people, tra
Open a newspaper today and you are bound to read about the next wave of emerging or high-growth markets. Whether it be a headline on Turkey becoming the third fastest growing country in the world by 2017, the passing of a new foreign investment law in Myanmar, or a new acronym touting a group of countries as the next BRICS, there is no doubt the global M&A market is changing. Shifting patterns in outbound M&A signal a greater proportion of deals involving high growth markets in the years ahead.
(This article appeared in Financier Worldwide and has been edited to comply with their editorial guidelines, which include UK spelling and grammar, and specific house styles for consistency.)
To be successful in acquisitions and integrations, we strongly recommend that organisations focus on some key numbers.
The first number to focus on is ‘70’, as in the Rule of 70/70.
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CEOs and their boards have always had a primary responsibility to compete for shareholder investment in the market. In order to do so, they must focus on driving up the intrinsic value (discounted cash flows) of the company to create demand for the stock. In simple terms, Intrinsic value is created from both ROIC (returns on invested capital) and Revenue Growth. Empirical evidence from both the stock market and cash flow analysis show that ROIC combined with Revenue Growth drive the intrinsic value and in turn the stock price. Stock prices, like all prices, are driven by demand. The hi
Companies are rethinking what should get done during due diligence and who should do it. In the past it was too often viewed as a discrete function separate from integration and best left to the financial, legal and other specialists to evaluate the target business on a stand-alone basis. Their focus was on addressing such issues as: Are assets overstated or liabilities understated? What is the proper valuation for the target company? How do we want to structure the deal from a tax and legal perspective?
Companies, their customers, and their stakeholders cannot and will not tolerate an integration time frame of more than 12 months, period. If you can’t integrate in 12 months or less, forget it! Many companies consistently operate in the intuitive mode of “don’t rock the boat”, “let’s take our time with this and give the organization time to adjust,” “let’s get