A large majority of acquisitions are justified by purchasers because they permit access to new and faster growing markets more rapidly than an organic strategy. It should perhaps come as no surprise therefore that the focus of UK acquirers has moved decisively away from their domestic market to the more tantalising emerging economies of China, South America and Brazil. The UK, seized in the grip of a double dip recession, is apparently no place for cash-rich UK corporates to deploy their capital, at least in the eyes of their investors.
The direct consequence of this profound shift in emphasis among UK corporates has been to make it harder for sellers of UK companies – however successful – to find a new strategic home for their businesses. This challenge has been compounded by the UK’s moribund debt market, which is constraining local private equity investors’ ability to offer appealing prices to owners of quality assets.
The challenge for UK vendors – and more acutely their financial advisers – is to be able to identify, reach out to and engage effectively with overseas strategic acquirers from all four corners of the globe. Given current UK M&A market conditions, it would be highly complacent, indeed negligent, for an M&A adviser to rely upon UK purchasers to generate the interest that their clients would wish to see in their sale process.
It is also deeply counter-productive for an adviser to spray indiscriminately teasers for a sell-side opportunity across hundreds of potential purchasers around the world. The last 10 years has seen corporate acquirers become ever more selective and focused on the types of acquisitions they wish to spend time on. As they have become more discerning, their approach to acquisition opportunities has become binary – the quick ‘no’ in greater evidence than the emphatic ‘yes please’.
“Knowing which buyers to go to for any given asset has never been more important to avoid compromising an asset’s intrinsic worth and to draw wary buyers into a constructive dialogue,” commented Jeremy Furniss, Partner, Livingstone London.
Few acquirers have the appetite today to subject themselves to the bruising auction processes that investment banks have traditionally favoured for anything but the most attractive targets.
Current market conditions are pushing clients towards M&A advisers with a proven track record of cross-border deals, a robust and ‘joined up’ international infrastructure and deep insight into industry sectors that means that they not only know which buyers should occupy the short-list but can point to an enduring dialogue with key decision-makers at those purchasers.