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The M&A World According to Directors
A recent survey of middle-market corporate directors mostly confirms the obvious: these are good times for M&A. But some findings surprise. Who knew that – after all the post-close horror stories we’ve heard – many directors still doubt their company’s ability to effect a cultural fit with its M&A targets?
Accounting firm Grant Thornton and investment bank Houlihan Lokey teamed up to tap the M&A opinions of about 385 board members at companies generating sales of from $100M to $3B. Here’s what they found:
• 61% think the economy will improve (though this attitude was advanced before the 2005 hurricane season);
• 66% think the number of M&A transactions in their industry will increase this year;
• 53% believe acquisition multiples will increase (as do we);
• 63% say their motivations for doing a deal are strategic, with 22% averring financial interests, and 13% operational economies;
• Of those thinking strategically, a strong majority (77%) claim that the underlying factor is a need to grow in order to compete;
• When asked how they felt about their company’s ability to generate effective strategic rationales, acquisition pricing, integration and a cultural fit with the target, 89% felt good about articulating strategic rationale, but only 65% were comfortable with cultural issues.
Last, but perhaps most interesting, are the criteria the directors use to select an M&A advisor. While “exceptional execution expertise” ranked second and “personal relationship” ranked third, the most important characteristic was “knowledge of your industry.”
We like that finding.
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