Date: March, 2021 | Author: John Gelmini |
In 2018 China was undertaking 40% of the world’s M&A transactions.
Today that figure is 50% assisted in part by State backing thus defeating potential European enquirers that don’t benefit from such support.
The EU is considering publishing a policy paper covering “review mechanisms” and “redressive measures” which would slow the acquisition process down.
Acquiring companies in America is already a minefield with Sarbanes Oxley legislation constantly being toughened up. Thus, any approaches to M&A not only have to look at historical data but also the 26 factors of Non-Financial Due Diligence, focusing on people in particular.
Valuations based on traditional approaches of Legal and Financial Due Diligence and a gentle approach to acquisition integration cannot easily offset these additional legal and regulatory costs.
Furthermore, the regulatory slowing down of the M&A process increases the length of time during which people uncertain of their futures slow down and are paralysed into low/non- performance.
Whilst not advocating a US-style “Big Bang” approach, at Truedil we do advocate much more rigour. This is focused on the 26 factors of Non-Financial Due Diligence. Concentration here determines which people, directors, managers, and processes are going to deliver what the Chinese acquirer wants to accomplish in a shorter timeframe.
Should these proposed regulations be tightened or expanded to include acquisitions where the initial shareholding is below the 35% threshold then it may be expedient to consider acquisitions operationalised through different jurisdictions where practicable.
Truedil M&A training is constantly evolving and being updated to deal with these problems and to produce valuations that reflect these new political and regulatory realities.
This is especially important for more junior managers being considered for promotion. Also, those being assigned to more senior deal teams as the pace of “swarming out” to make more M&A deals, accelerates.