Post Merger Integration Just Got Tougher
Updated: Aug 17
Australian mid-market deals of between $10m-$250m represented 77% of our total 2019 deal volume across small, mid, and large caps. This was up from 70% in 2018. However, drought, bushfires, and Covid-19 will likely reduce mid-market merger and acquisition volume in 2020.
While recognising the significance of these events, it is important to remind ourselves why Australia will still be a favourable source of mid-market mergers and acquisitions, compared to other countries in our region. Global and domestic investors will still preference our mid-market opportunities, because of Australia’s:
Strong growth in healthcare and technology sectors who represent good buy-side value
The stable political and regulatory environment and ease of doing business. Although, our government’s recent clampdown on foreign investment may challenge this assumption
Limited exposure and impact from the US-China trade war and Brexit
Favourable mid-market valuations and returns compared to the rest of the region
Pro-active response and suppression (so far) of Covid-19
Strong private equity community and their high level of dry powder capital
Also, increasing recessionary pressures could drive a relative resurgence in Australian mid-market M&A activity as entities seek to consolidate and strengthen their market positions and core businesses. Contributing factors are:
Increased domestic deals because of heightened geopolitical risks and rising protectionism
Corporate restructuring of non-core and underperforming assets to free up funds
Increased private equity activity as they unlock their war chests of dry powder
So, buyers and sellers will still be motivated to participate in M&A activity, but they face additional execution challenges due to economic uncertainty and social distancing. These challenges include:
Determining and agreeing forward projections and valuations in a more uncertain world
Extra due diligence required for emerging payroll integrity issues and new whistle-blower regulatory requirements
More stringent foreign investment regulations
Banks and other funding lines reducing their risk profiles and rebalancing sector exposures
Completing due diligence, the deal, and business integration with Covid-19 enforced social distancing
Navigating the M&A process in a Covid-19 world will drive steep M&A learning curves that will test all buyers and seller’s resolve and adaptability. No more so, that during the business integration phase. 40% of all mergers and acquisitions were already failing before Covid-19 because of poor business implementation leadership and execution.
Is your organisation ready to successfully integrate your acquisition or merger in the new Covid-19 world? Does your organisation have the right leadership, skillsets, and tools to execute your business integration and deliver targeted synergies and value?
About M&A Integration Partners
We specialise in leading the execution of our client's POST MERGER INTEGRATIONS to deliver targeted value with minimal disruption. We support mid-market organisations who do not right fit leaders, capabilities, and tools to ensure a successful post merger business integration. Our experienced Business Integration Leaders work our client’s business to:
Lead and stabilise the entity to be integrated
Assemble and lead the Business Integration Team
Design and build the Business Integration Roadmap
Lead the Business Integration Program and mitigate execution risks
Identify new synergies to enhance the original business case
Measure outcomes and update executive sponsors
All our Business Integration Leaders are experienced VP/EGM level leaders with a deep understanding of business fundementals, M&A, and Post Merger Integration.
Contact M&A Integration Partners to discuss how we can support your M&A activity.
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