Creating value beyond the deal: industry insights
Market disruption is driving M&A activity in all sectors, but not all deal activity is maximising value creation. At the same time, all industries are being affected by the coronavirus (COVID-19) outbreak; although the overall scale and impact are yet to be determined, they are already significant.
Even in industries that are realising returns, a greater focus is still needed across the board on strategy and planning, as well as consideration of culture early on. To explore the unique and shared challenges of a variety of industries, we interviewed c-suite executives, globally, to uncover how they create value from their M&A.
What if you took a different perspective to your M&A?
#BeyondTheDeal
of all deals have customer retention as the key
priority on Day One.
Retail, consumer and leisure
Increased disruption from changing purchasing trends, the rising cost of trade, industry convergence, technology and the need to shift toward newer, more competitive business models are just a few trends that are driving leaders in this industry to turn to dealmaking. The challenging climate makes it all the more paramount that these deals create value. It’s not just the quantity of deals that’s needed, but quality.
The majority of retail, consumer and leisure leaders who took part in our survey say they believe their latest transaction generated value for the business, but our research shows that acquisitions in the industry don’t always achieve expected results – and, in some cases, acquisitions can even destroy value. Deals must be approached as part of a clear strategic vision and with a comprehensive value creation plan that also prioritises people and culture.
Some corporate acquirers are even taking the step of building pre-emptive value creation plans for their acquisition targets ahead of the asset coming to market. This positions the buyer well and may even trigger the start of the sales process.Neil Sutton, Global Consumer Markets Deals Leader, Partner on secondment to PwC China
return in terms of total shareholder return (TSR) generated by companies in excess of the industry norm - or industry peers.
Industrial products & services
The industrial products and services (IPS) industry has a track record of which it can be proud when it comes to measuring value creation from mergers and acquisitions, in particular when looked at from the perspective of the acquirer’s share price performance.
In the 24 months post-acquisition, IPS company share prices tend to significantly outperform those of other industries. What are IPS execs doing differently? What can be learned?
Although the industrial products and services industry has a good M&A track record overall, a more disciplined approach to value creation and greater focus on the strategic fit of the target are areas of opportunity to further maximise value through M&A.Paul Elie, Global Industrial Manufacturing and Automotive Deals Leader, PwC US
of value-creating deals delivered revenue growth.
However, this value lever still received less focus
than cost-cutting.
Private equity
The opportunities for private equity (PE) are considerable, including capitalising on tech disruption, changing customer expectations and embracing new business models. There are also opportunities to be at the forefront of consumer and market shifts such as the drive for sustainability.
With a proven track record of creating value through cost efficiencies, private equity firms are in a great position to look at how a deal can create even more value.
The leading private equity players have a value creation model where they monitor and record the value creation achieved on every deal they do, including the levers for that value. It’s absolutely at the heart of their culture.Will Jackson-Moore, Global Private Equity, Real Assets and Sovereign Funds Leader, PwC UK
of buyers said their planning for
Day One readiness could have been improved.
Financial services
As the financial services (FS) industry continues to experience disruption, our insights show that global deal activity is robust. Companies are looking to consolidate, acquire new technology, and adapt business models, while selling underperforming and non-core lines of business.
While most acquisitions are deemed successful for most respondents, our findings say they could have been executed better to create even more value. This can be achieved through better target selection, a value creation blueprint defined and considered early on, talent retention and cultural integration planning, and Day One readiness.
Value creation planning should be about helping the acquired business realise its full potential and taking it to the next level and is a must for any financial services company wishing to create real benefits through M&A activity.Nick Page, Global Financial Services Deals Leader, PwC UK
of TMT deals have a technology plan at signing,
higher than any other industry sector.
Technology, media & telecommunications
The transformative potential of technology makes for strong M&A performance for technology, media and telecommunications (TMT) companies. Savouring the potential for big gains from the right deal, TMT companies, most of which live in fast‐paced and constantly shifting business environments, are drawn to these “winner‐take‐most” M&A dynamics in their industry.
Although the percentage of TMT acquisitions that create value is roughly in line with other industries, the returns from “winning” deals are higher in TMT than almost every other sector, in some cases by a significant amount. But like other industries, for consistent value creation and preservation in M&A, TMT companies need to maintain their strategic focus.
Given the unique position of TMT companies in transformation activities, acquiring new technologies, products or expanding expertise in markets that support digitisation can drive extensive growth over the short‐ and long‐term.Rob Fisher, Global Technology Deals Leader, PwC US
of deals are impacted by
cultural issues in the energy industry.
New energy and culture
The transition to new energy is generating more investment opportunities than ever. Because new energy mergers and acquisitions are often in areas which are either adjacent to the existing business, or completely new to it, the acquiring company will frequently need to build new capabilities and acquire new skill sets. This is where the role of culture becomes critical to creating and protecting value.
To explore the role of culture in new energy and the critical part it has to play, we interviewed senior decision makers at both acquiring and acquired organisations. We delve into the present state of the new energy deals landscape and provide insight into what acquiring companies are doing well, but also what needs to change.
Understanding how to nurture culture throughout the integration cycle (both before and after the deal) ultimately determines which deals succeed, and which don’t, in these new energy markets.Andrew McCrosson, International Deals and new energy Leader, PwC UK
Lessons learned across industries
We found that once a deal has been signed, there is a marked difference between different industries on how they focus on value creation. We know that companies that genuinely prioritise value creation early on have a better track record of maximising value in a deal. But, then why in some industries is the strategic plan not a key Day One consideration?
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