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2.m&a in The Downturn - 4 Pages
2.m&a in The Downturn - 4 Pages
in a Downturn
“Buying low” can be a major driver of high performance
While many organizations are This can allow them to make a bolder Yet even when done at a discount,
struggling, there are enterprises “strategic play”, gaining market and mergers and acquisitions still have
with strong balance sheets and good leadership positions that they might inherent risks in terms of integration
recent economic performance that are not have had the resources to do complexity, organization disruption
well positioned for exercising inorganic before. Third, companies that have and management distraction. The keys
growth options and should find the relied on debt and equity financing or to successful M&A during a downturn
current environment highly conducive have less favorable financial positions are the same as during prosperous
to creating value from acquisitions. typically must sit on the sidelines, times: Make sure that the underlying
meaning far less competition for an valuation correctly measures realistic
In fact, acquisitions during a recession acquisition, and, thus, fewer companies revenue potential; stay true to growth
actually can create greater value and bidding up the price. “Cash is king” strategies and look at targets that
impact for three reasons. First, the in this environment, so instead of just increase competitive positioning by
“entry price”—the cost to gain access hunkering down, companies in a strong filling an identified need; properly
to the stream of cash flows, market financial position should capitalize on address synergies; and effectively
segment, capability and synergies “sale-priced” acquisition opportunities execute the integration of an acquisition
from the acquired business—is often to help fill strategic gaps, buttress so the enterprise can meet the
much lower, as companies’ market market positions and add to organic operational and financial targets
capitalizations have dropped around growth. This may take some convincing justifying the deal.
the globe to levels around 40 - 70 for many Boards as the inclination
percent below where they were just may be to conserve cash, wait until Five keys to successful M&A
a year ago. Second, due to the lower market volatility subsides, and avoid
Based on our experience helping
values, organizations are able to go riskier overseas forays that may test
clients complete more than 400 mergers
after targets that were formerly out increased protectionist tendencies
or acquisitions—including six of the
of reach. by governments in a downturn.
10 largest—in the past six years,
Industry leaders will balance the
Accenture believes companies looking
risks and capitalize on the best
target opportunities.
to use acquisitions as a means to gain Results of Consumer Opinion Survey on M&A
scale and generate growth during and Survey Question: Do you believe consumers benefit when companies merge or
after a downturn should consider the are acquired?
following five critical actions. Percent of respondents that answered “No”