City AM today reported that small and mid-size companies have been increasingly active on the M&A scene in the first half of this year - dabbling in a greater number of more lucrative deals as the economic tide begins to turn.
Financial Market specialists, Thomson Reuters’ latest review reflects this - stating that the value of global mid-market mergers and acquisitions (mid-market defined as companies valued up to $500m), surged by 42.3 per cent to £206.9bn over the past six months.
In the UK, despite fears over the impact of the coalition government’s fiscal tightening, mid-market deal values rose by almost 90 per cent for the half-year. And the UK was not alone in showing an increase in activity with almost every region across the globe experiencing growth in mid-market M&A activity.
However not all commentators are bullish on the current M&A Outlook.
KPMG’s latest Global M&A Predictor showed that although forecast net debt to EBITDA ratios have come down by 20 percent - indicating increased deal-making capacity - forward PE ratios have tumbled by the exact same amount, suggesting that deal-making appetite is under severe pressure. Commenting on the latest Predictor results, David Simpson, Head of Global M&A at KPMG said: “M&A has always been a confidence game and the latest Predictor suggests that it is currently in short supply”.
Coverage from the Financial Times recently stated: “Europe's sovereign debt crisis and turbulent financing markets rattled the confidence of corporate dealmakers across the globe in the first half of the year, damping already lacklustre mergers and acquisition activity”.
It is the FT article includes a particularly interesting metaphor from M&A stalwarts Citigroup, who’s European Head of M&A, Wilhelm Schulz said "The gun is loaded, but in light of recent market volatility, boards are reluctant to pull the trigger".
What’s all this got to do with Business Systems?
As Gartner rightly points out M&A activity leads to a need for good integration skills. They recommend that chief information officers should brush up on these skills so that companies are primed to reap the benefits of any future M&A activity.
Dave Aron, VP at Gartner says “IT should be placed firmly at the heart of M&A plans with an involvement that begins at the due diligence planning stage and culminates at the "reap the benefits" phase”.
Mary Mesaglio, a research director at Gartner continues: "A good rule of thumb is that roughly 25 per cent of a typical M&A integration effort will come from IT. But the time and effort that each phase requires from IT varies significantly”.
From Invenio’s experience, integrating systems (or decoupling them in the case of divestment) can be a complex process. In the same vein, implementing a brand new solution to help integrate the various constituent parts of a group of businesses to become one entity takes considerable time... business processes must converge and a common set of operational standards and methodologies must be agreed. If you’d like to find out more about the IT challenges brought about by M&A I’d be happy to help so please do drop me a line if this is an area of interest (or, indeed, frustration)!
Laura, Marketing Director and Chief Blogger
Sources:
http://www.cityam.com/news-and-analysis/mid-cap-ma-activity-surges-economy-rebounds
http://www.ft.com/cms/s/0/1a9d90ec-83de-11df-ba07-00144feabdc0.html
