Stephan Illenberger, managing director for Axa Private Equity Germany, believes that the biggest change in the last five years is that previously everything was sellable.
Illenberger comments: ‘The big differentiation is between good assets and not so good assets, buyers’ and sellers’ expectations are not matching.’
The assembled panel at the Third Global M&A Symposium spoke on a number of issues such as availability of finance, cross border challenges and private equity growth. However, the prevailing opinion is that there is still a high level of caution surrounding the M&A market.
John Normand, at JPMorgan Chase, explains: ‘There has been a rethink on how important precise exchange risk is.’
For a deal to secure finance, Martin Schwab, partner at Pamploma Capital Management, thinks that there is now much more of a focus on resilience of business models.
Schwab says: ‘It is very difficult to bring finance together for deals that haven’t demonstrated resilience.
‘People are inherently more concerned than they used to be.’
As businesses come out of the downturn and look to return to previous revenue levels, the level of planning undertaken by businesses’ management teams is a big part of looking forward, Illenberger believes.
‘You cannot survive if you are not prepared, you need to have a plan to accommodate sales drops. People who were prepared are not afraid of the future,’ Illenberger comments.
There was reason to be optimistic about the levels of financing available for deals though. Newman believes that there is evidence of banks underwriting deals in the mid-market.
He adds: ‘There is liquidity coming back.’
Speaking at the event, the Lord Mayor of the City of London Michael Bear outlined commodities, cash, and creativity and innovation as the three key factors that make up a thriving M&A environment.
Triumphing the offerings of London, Bear highlighted the cluster of services that are within walking distance in the city as one of the biggest reasons that M&A is prime in the UK economy today.
The key challenges that face the M&A market in the coming 12 months are a combination of competition and regulation, believe Schwab and Illenburger.
Commodity pricing and the ability to find good deals in a market which has a lot of interested parties is where Schwab sees the future challenges as coming from.
Illenberger thinks government regulation, particularly in taxes, as possibly having a big impact on M&A.
See also: To merge or not to merge? – In downturns, ‘mergers’ are often driven by the need to survive as markets contract and margins are recovered through economies of scale.
