Purandar Rao, Partner and Far East Leader for Transaction Support
Ernst & Young Solutions LLP
November 2009
There have been many casualties over the past year, in particular, investor confidence in economic and financial forecasts underpinning company valuations. While an economic downturn was not entirely unexpected, the sudden impact on international trade and the knock-on effects on overall demand have caught many by surprise.
The traditional merger and acquisition (M&A) “rule book” as we knew it has changed dramatically in the last six months against the backdrop of a transformed deal landscape. Where corporate players feared to tread, they now lead the charge as did the big guns of private equity before. Where credit flowed freely in a buoyant market, debt-financed acquisitions have become far and few in between. We are now witnessing the re-writing of the new M&A “rule book” – one that advocates flexibility, creativity and a measure of calculated boldness in deal-making.
Corporate players are recognising that there are opportunities now to approach the businesses that they have always wanted to own but thought would never become available. Many of them are sitting on a lot of cash and have previously lost out to private equity on deals. The story replicates throughout the region where corporate acquirers await opportunities, whether regional or global, to capitalise on the relatively attractive valuations to pursue strategic growth in new markets. A study of executives at 570 leading global companies which was conducted by Ernst & Young in June saw 34% of the respondents stating an intention to carry out strategic acquisitions in the next 12 months and 21% intending to carry out strategic acquisitions in new areas of business.
