August 17, 2015

Key M&A Trends: Overseas Expansion Going Mainstream

Deloitte’s recently released 2015 M&A Trends Report reveals a booming, wide-reaching M&A environment spanning small, mid-sized and large public and private companies and private equity firms, multiple industry sectors, and domestic and overseas markets. The report reflects the results of an early 2015 survey of more than 2,000 public and private companies and over 400 private equity firms.

Noteworthy findings include:

– Strong interest in overseas expansion. Among private equity respondents, 85% indicated that their deals involve acquiring a company domiciled in a foreign market – up from 73% last year. And 74% of the corporates are investing overseas – up from 59% last year.
– 39% of corporates expect to tap into the robust M&A environment to pursue divestitures – up almost 25% from last year.
– 85% of corporates anticipate acceleration of – or at least sustaining – last year’s M&A pace; only 6% expect deal-making activity to decrease.
– 94% of private equity firms forecast average to very high deal activity – up from 89% last year.
– Private equity firms anticipate ramping up both add-on acquisitions and portfolio exits.

Note that global M&A value in the first half of this year reportedly hit an 8-year high – second only to the all-time record set in 2007.

Deloitte’s report also notes that the vast majority of corporate and private equity respondents said that their deals fell short of financial expectations. See my earlier blog on tips to achieve post-merger integration success.

Directors with Foreign Experience Linked to Improved Company Performance

This interesting paper discusses the results of a study about the impact of directors with foreign experience on company performance in emerging markets based on unique, but purportedly adaptable, data from Chinese markets.

The authors demonstrate these impacts associated with foreign directors on the board:

– Increased company valuation, productivity, and profitability
– Improved corporate governance, as evidenced by a decreased propensity to manage earnings (captured by estimated discretionary accruals)
– Greater likelihood of international acquisitions (suggesting a broader range of investment opportunities) and other indications of internationalization, e.g., increased exports and engagement of foreign investors for capital-raising

The authors note that these benefits associated with foreign directors on the board may be presumed to result from their exceptional talent or their foreign experience – but that evidence suggests foreign experience plays the greater role.

See also my earlier blog concerning the underrepresentation of directors with international experience on S&P 500 boards, and this tip from DuPont’s CEO: “Be Wary of the Jet-Lagged Director.”

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– 2015 Challenges & Practical “To Dos”
– Gender Balance on Boards: Five Steps to Achieve Success
– Inside Baseball: Working for an Independent Auditor
– Japan: A Proposal to Allow Only Long-Term Investors to Vote
– What’s Up with IPOs?


– by Randi Val Morrison