Cross-border deals make up half of M&As

M&A activity is expected to maintain its momentum of the last few years, a new survey by consultancy Accenture revealed. The study found that UK executives anticipate M&As to account for 17.3% of their companies' global revenue growth over the next three years, a rate similar to the 17.7% of the last three years.

by Accenture

The research also found that cross-border acquisitions are becoming increasingly prominent in UK M&A activity: 56% of executives say that their most recent acquisition has taken place abroad. Of particular interests were China, the US, India, Brazil and Spain.

Caroline Firstbrook, head of Accenture corporate strategy practice, explains: "These findings reflect two different trends. Firstly, that there is a strong desire amongst companies from Western countries to get into the large and rapidly growing Asian markets and, secondly, the continued strong affinity and compatibility between the UK and US, making cross border acquisitions between these two countries more likely to succeed."

The main driver for this increase in international activity is a search for profitability (56% respondents), conformity to corporate strategy (55%) and a will to diversify the company’s know-how (39%).

International ventures, however, are not without their complications. Just over half of executives surveyed were confident in their company’s ability to identify an adequate company within the target market, and in the rigour and accuracy of the due diligence process.

A majority of respondents also said they doubted their skills in areas crucial to cross-border deals like change management, IT integration, managing cultural differences and application of local laws and regulations.

"Whilst [overseas M&A activity] may initially appear to be a lucrative means of expanding your business, it does also present challenges in execution which are quite different to those in the local market," says Firstbrook.

The study concludes with four recommendations: plannning a clear strategy, preparing the ground (research the local culture, regulations etc), valuing new employees for their skills and knowledge, and focusing on execution as early on as possible.

Source: Accenture M&A research paper
Review by Emilie Filou

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