Post Merger Integration Just Got Tougher

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.

Post Merger Integration Just Got Tougher in 2020

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