Unflinching investor support, along with still-cheap funding and slow organic growth, helped push global deal making to a rapid pace in early 2018.
Indeed, deal value in the first half of 2018 was higher than the first-half average for 2009 through 2017 and only slightly below the first-half figure in the record-setting year of 2015.
Total deal value was $1.7 trillion, with more than 16,000 deals globally.
The 2018 M&A Report examines the trends that have moved synergies to center stage in deal making and how dealmakers and investors have responded.
Importantly, buyers are giving away a higher share of the total synergies in order to afford their deals.
In today’s seller’s market, buyers are keeping less than half of the synergy potential, with the remainder going to targets’ shareholders at closing.
In examining these trends that have moved synergies to center stage, Boston Consulting Group analyzed a unique data set of the 1,000 largest public-to-public deals over the past ten years.
The report notes the megadeals that continued to drive this surge during the first half of 2018.
Walmart’s acquisition of the Indian e-commerce leader Flipkart for $16 billion, beating a bid by Amazon, was cited as an example of how major players such as Walmart are pursuing acquisitions beyond their traditional core capabilities and markets.
The authors next discuss how US Tax Reform promotes deal making. Especially as M&A activity is among the top uses for repatriated cash, deal making will likely receive a boost, at least to some degree.
By way of summing recent activity, the paper identified four trends that stand out today; investors place their bets on dealmakers; shareholder activism is the new normal; private equity struggles to find attractive targets; and transaction multiples keep rising.
The paper provides a detailed analysis and discussion of how today’s lofty valuations place synergies on center stage, including an explanation of how “synergy-searching” works in practice; the three principal paths of Revenue synergies, Cost synergies and Balance sheet synergies; how rising synergy estimates generate value for transactions; and how markets reward synergy announcements.
The authors also discuss elevating synergies on the board agenda, the use of clean teams in planning and jump-starting an integration and communication to investors.
By, Timo Schmid, Associate Director in the Munich office of The Boston Consulting Group; Dr. Jens Kengelbach, Senior Partner and Managing Director at The Boston Consulting Group; Dr. Georg Keienburg, Principal and Core Member of the Corporate Development and Industrial Goods practices at The Boston Consulting Group; and Dominik Degen, Corporate Finance and Transactions Knowledge Expert at The Boston Consulting Group.
Content originally from Transaction Advisors
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