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How to Win M&A Deals in an Uncertain Europe
- 1. Webinar: How to Win Deals in an Uncertain Europe
- 3. Today’s Presenter: Ulrich Schneider Partner Proventis Partners GmbH
- 4. Proventis Partners focuses on consulting companies and private equity investors in M&Atransactions and corporate finance projects. From our offices in Hamburg, Munich and Zurich, our team has supported corporations, medium-sized companies and financial investors in over 200 projects on a national and international scale. Our areas of expertise are within the sectors of retail and wholesale, healthcare, industrial services, IT and telecommunications, consumer goods, logistics, engineering, media and renewable energy. About Proventis Partners
- 5. All Eyes on Europe… BREXITRefugee Immigration Greek Bailouts Italian Banking Crisis NATO vs. Russia Turkish Failed Coup Fallout . . . TTIP Failure?
- 6. However, European Cross-Border M&A Activity Continues to Grow Q1 2013 – Q2 2016 European Cross-Border Transactions* * Only announced, closed or effective transactions with identified purchaser, excl. real estate transactions Source: Capital IQ 2013 2014 2015 2016 1.155 1.069 1.157 1.172 1.009 1.068 1.033 984 997 946 995 855859857 39% 36%35% 39%40% 38% 40% 39% 36%36% 39%38% 35%34% Q4 Q1Q1Q3Q2Q1 Q2 Q3Q4 Q1 Q2 Q4Q3 Q2 Cross-Border M&ATransactions ShareofNon-EuropeanBuyers
- 7. UK Continues to be the Most Active M&A Market, but Germany is Catching Up Q1 2013 – Q2 2016 European Cross-Border Transactions by Target County (Top 5 European Economies)* Source: Capital IQ 2013 2014 2015 2016 0 20 40 60 80 100 120 140 160 180 200 220 240 Q2Q1 Q3 Q1 Q2Q2Q3 Q1 Q3 Q4Q2 Q4 Q1Q4 Spain UK France Italy Germany * Only announced, closed or effective transactions with identified purchaser, excl. real estate transactions
- 8. Don‘t be an Outsider When it Comes to Cross-Border M&A! • Add new technologies • Work with international talent • Reach new customers • Diversify business risks
- 9. Cross-Border M&A Processes Require Consideration of Numerous Local Issues Deal Sourcing Post-Deal Integration Deal Execution Political / Economic Environment • Politics, Macroeconomics, Competition, … Cultural Environment • Language, History, Customs, Biases, Corporate Cultures, … Legal & Financial Regulations • Corporate Law, HR,Accounting, Taxes, …
- 10. A Successful Cross-Border M&A Process Requires Individual Deal Management • Define your motives for an acquisition • Have your eyes and ears on the ground • Act according to the cultural environment • Work with local partners • Invest in the transaction process
- 11. Questions? To learn more about Navatar, a cloud provider for the financial services industry, please contact Nicholas Donato. Email: ndonato@navatargroup.com Phone: 212-863-9655 ext. 3662 To learn more about Proventis Partners, please contact Ulrich Schneider. Email: u.schneider@proventis.com Phone: +49 40 36097 59-0
- 12. Thank You
Notas del editor
- My name is Ulrich Schneider I am a Partner in the Hamburg Office of Proventis Partners. I have over 15 years of M&A and Strategic Advisory Experienced and focus on domestic and cross-border transactions, particularly in the industrial and consumer sectors. I am an industrial engineer and hold an MBA from INSEAD.
- "Ulrich is a Partner at Proventis Partners. He has 15 years of M&A and strategy consulting experience and focuses on advising corporations and private equity investors on midcap transactions in the consumer and industrial sectors. Ulrich has a degree in industrial engineering and holds an MBA from INSEAD. „
- Before discussing how to win deals in Europe, let‘s first address a few current concerns about the EU. Whenever you open your newspaper or or watch the news can‘t help but think that Europe is in dire straights. I don‘t want to go into detail on every aspect, but from an M&A point of view, at least, the situation is not as dark as many suggest. For examples, one of the biggest headlines in 2016 was the Brexit and while the outcome of the referendum schocked most people, I beleive the effects on M&A activity will be much less negative than suggested: Many corporations will be forced to reduce their UK exposure, leading to the sale of assets At the same time, others will look more at continental Europe in order to have exposure to the EU, which will likely no longer be possible out of the UK alone. A depreciation of the Pound and the Euro will reduce valuations for global investors, making European companies more attractive targets. Strong economies, like Germany, will be seen as stalwarts of stability, which will benefit dealflow. Other factors, like Chinese appetite for international industrial targets, will continue to provide strong demand for attractive assets.
- Now that we have taken a look at current concerns, let’s take a look at the data, and it shows that cross-border M&A Deals in Europe have continued to grow over the past quarters. Furthermore, the share of non-European investors has remained largely stable and has recently increased again, indicating the continued interest of global investors. Among global investors, North America has the largest share with nearly 60% and over 500 deals in the first half of 2016 alone. Investors from the Asia-Pacific Region have acquired about 230 European companies in the first half of 2016 alone. This number has tripled vs. the first half of 2013.
- Next, let us take a look at the M&A development on a country level and discuss the markets and industries that I’m seeing the most interest. While the UK saw a drop in M&A activity in the months running up to the referendum, Q2 2016 saw a recovery. For investors looking for attractive assets outside the UK, Germany is clearly the place to be. As mentioned earlier, many Corporations are likely looking for a new European base of their business and Germany offers political and economic stability as well as many innovative companies in all size clusters. The surge in German cross-border transactions is also driven by strong interest of global investors in German industrial targets. Especially China, with more than 20 acquisitions in the first half of 2016 is very actively pursuing German industrial companies. Examples include the acquisitions of Robotics manufacturer Kuka by Chinese Midea corporation, Aerospace supplier Broetje by Shanghai Electric or the sale of specialty machinery manufacturer Krauss-Maffei to state-owned ChemChina, which by the way is currently acquiring Swiss agriculture chemicals manufacturer Syngenta for 43 billion USD. Other leading sectors for cross-border M&A activity next to industrial machinery are IT/Telco and Consumer Goods.
- So, we’ve talked about Europe being a scary place from the outside, but in fact, “insiders” know better and deal flow actually remains strong. Now, let’s first talk about why it makes sense to continue the pursuit of excellent targets and then what to look out for in order to win deals. As mentioned before and evidenced by the active M&A market in industrials, the opportunity to acquire attractive technologies play a major role in current dealflow. Chinese investors, for example, are looking to gain access to cutting-edge technology in order to adapt this in its home market. Both technology leaders and “hidden champions” are also home to talented engineers and workers, which can transfer know-how to the acquirer. Many companies look at diversifying internationally in order to gain access to new customer markets and the corresponding sales and distribution organisations. Finally, diversifying geographic risks is a major driver for reaching out to new markets.
- After discussing the reasons why investors should continue to pursue international M&A opportunities, let us talk about how to successfully source and execute M&A transactions in Europe. Investors need to understand that cross-border M&A processes are generic only on the surface, but are rather affected significantly by the individual local circumstances. The broadest and most significant factor that international investors need to consider is the cultural environment in a specific region – Europe is very diverse, evidenced by various languages. For example, it cannot be expected that owners and managers of mid-market companies are sufficiently proficient in english. This means it should be considered that an initial approach is formulatd in native languages. In our experience, this opens a lot of doors as it shows consideration of the local language. Local customs are worth considering as well: We had an M&A process stalled for several weeks, as the work with French target was not possible due to French summer vacation. There is a clear bias towards international investors, especially at the lower end of the market, where the stereotype of an anglo-saxon investment banker clerarly persists. Investors need to take into account the political environment and often significant local regulatory differences, for example, Labor laws in Germany or France are much stricter than in the USA, which might lead to reduced synergy potentials. While legal and financial regulations as well as the overall political and economic environment provide the formal framework for transactions We regularly work with large multinationals as well as PE firms looking to find targets in the German-speaking region. We analyze the competitive environment, identify potential targets with respect to size, stage, ownership status, corporate structure and strategic fit, and then act as a first contact as we explore the willingness to enter into discussions regarding a potential transaction. This improves the chances of our clients significantly to truly find proprietary transactions, rather than waiting for potentially being contacted as bidder in a competitive M&A process.
- So, let me conclude with some thoughts on how you can be more successful in creating attractive M&A opportunities in Europe First of all, develop a clear understanding of why you want to find acquistions internationally. Think of what the ideal target would look like and what the environment needs to be for a successful deal. Have your eyes and ears on the ground – try to get a feel for the local market and its participants. Understand the cultural aspects of the market your are looking to invest in to improve your chances at creating rapport with your targets and succeeding during execution of deals as well as the integration fo the acquired company and its employees. Work with local partners who understand local customs, laws, and financial regulations, rather than just looking outside-in. Be ready to invest into the transaction process. Cross-Border deals often require significantly more time, resources and money to execute. These advices might seem simple, but they are crucial to succeed. International M&A transactions often do not fail due to technical or financial discord, but rather due to cultural incompatibility and disregard of the local environment. A structured approach to managing these factors is crucial in my opinion.