M&A 2020

Global PMI Partners 2019 Year in Review

By Global PMI Partners


A Look Back – A Look Ahead

Global PMI Partners provides integration planning & execution support to customers worldwide on the complex operational, technical and cultural issues critical to M&A success. As 2019 comes to a close, we would like to share the deal activity we’ve seen and our predictions of areas that will grow in 2020.

United States

US M&A performance remains robust in both the private equity and strategic buyer segments through 2019. Deal flow is driven primarily by US domestic M&A, followed by US/UK activity, and partially offset by fewer US/Asia transactions as a result of US/China policy negotiations, which will continue into 2020.

2019 has been one of the busiest years for platform acquisitions and consolidations for Private Equity (PE) clients, due to a renewed focus on identifying and achieving tangible top line revenue opportunities. This resulted in a growing number of firms targeting smaller deals for add-on acquisitions.

PE and strategic buyers alike have begun focusing on the challenge of post-merger integration and implementing strategies to mitigate associated risks. With many companies are already lean and efficient, integration work places greater responsibilities on an already stretched workforce. Global PMI Partners US is seeing a trend of acquired company leadership remaining active and engaged in the business longer than in earlier transactions. Strategic buyers are developing longer term acquisition strategies, with an increased emphasis on corporate maturity development, and a higher reliance on corporate development executives to take an active integration oversight role post-close.

Heading into 2020, analysts reports suggest there is still a good deal of PE “dry powder” looking for solid platform acquisition and add-on opportunities which will drive the US M&A ecosystem.

United Kingdom

Global PMI Partners UK has grown with existing and new M&A clients during 2019, with about half of our work focused on each. With renewed focus on restructuring businesses following transformational acquisitions, we have also seen an uptick in operating model work over and above our transitional Integration Management Office (IMO) and Carve-out Management Office (CMO) leadership support work.

We’ve seen M&A activity in many sectors this year, but in particular domestic and bi-directional cross-border in Technology, Software & IT Services, Manufacturing, Pharma, Biotech, Insurance, Professional Services, Betting & Gaming and FMCG. We expect this M&A activity to continue into 2020.  Mid-tier firms, with Private Equity backing, will also to continue to expand market share and diversify into new markets at an accelerating pace.

Private Equity, traditionally a mainstay of our US colleagues, has seen some early traction in the UK, including the onboarding of Bain Capital, Permira and Mayfair. We look forward to working with the portfolio companies of these important new clients in 2020, whose approach does extremely well with our own model. We also look forward to onboarding other major PE brand names as the reality of our compatible senses and expertise in this market becomes better known through our global and UK marketing strategies.

Nordics

Downward economic pressure is causing a shift in M&A focus within the Nordics, resulting in a slowdown in both the number and value of mid-market deals during the second half of 2019. Corporate strategic buyers have slowed down the processes and are acting more diligently when looking at deals.

Upper middle market private equities in the region have begun to realize the importance of getting the soft factors, such as leadership, people, communication, culture and change management, right to create value in M&A.

Corporate spin-off activity remains strong in 2019 and should continue into 2020, as companies prepare for a slow-down in overall economic growth and activist investors continue to place pressure on management to improve efficiencies. The amount of dry powder in Private Equity, for the Nordics, remains strong and ready to capitalize on these spin-offs.

Digital transformation, as part of deal rationales in M&A transactions, is accelerating. With up to one third of tech deals coming from outside the sector, businesses are looking to optimize operations and offerings. This wave of digitization will continue into 2020, presenting opportunities for significant core process and application optimization, while concurrently integrating companies.

Benelux

Global PMI Partners Benelux worked on a variety of deals in 2019, spanning the full deal lifecycle.

We provided trainings and built integration playbooks and toolkits, including one for a Private Equity player, as well as a major German online marketplace. We continued to support the “merge and build” strategy of Lesterius, the largest European player in Claris workplace innovation technology. We facilitated a Belgium/US/Canada strategy assessment for a global leader in industrial machines. We mobilized the Integration Management Office (IMO) for a cross-European project integrating Corex and Corenso – creating the number 3 in paper cores, and went on to provide support for 150 days post-closing.

These deals help prove that 2019 was an exciting year for M&A in Benelux. We also saw two technology companies reach unicorn status, while a third is well-positioned to reach the $1 billion valuation mark in 2020. With less than 10% of companies in this elite club located outside US and China, these tech giants are particularly important to Benelux and the entire region. The growth of these cloud-based technology companies will have a lasting impact on European M&A activities in 2020 and beyond.

Further consolidation within the technology sector is anticipated to drive deal flow into 2020, as technology giants continue with acquisitive strategies. Growth companies will have only two options into the next year: acquire or be acquired.

Italy

With economic concerns rising and labored political-business relationships, 2019 posed a challenging year for Italian M&A activity.

Within the automotive sector, the recently announced merger between FCA and PSA brings with it a looming drain on employment, due to the announcement of an anticipated 3.7 Million Euro in synergies. Both automotive companies have historically been active within the M&A space in Italy and, more and more, abroad.

Government involvement in the failed acquisition of an Italian steel plant by ArcelorMittal, the world’s largest steel manufacturer, is being watched carefully by the markets. Options on the table could result in a potential reduction in workforce, or the unlikely takeover of the plant by the government. This is going to have a huge impact, more on the stability of the Government, than on the economy of the country directly.

Global PMI Partners Italy continues focusing on Private Equity that remains a good source of deals.

We expect a “wait and see” approach to M&A in 2020, given the country’s economic and political situation. Furthermore, slowdowns felt in other European regions may place additional downward pressure.

China

Similar to 2018, China M&A activities experienced a significant cool down in both domestic and outbound deals by Chinese acquirers in 2019. The trade war with the US, policy tightening in the form of capital outflow control, and an overall cooling of economic growth during the year resulted in a reduction in both deal flow and the size of transactions. While the impact of the trade war and capital controls are expected to continue into 2020, economic conditions appear to have stabilized and are expected to improve next year, bringing M&A deal flow back in line with historical levels. One of the bright spots is the increasing investment activities in southeast Asia countries by both multinationals and Chinese companies for emerging market opportunities and supply chain optimization and risk mitigation, in which Global PMI Partners China has contributed with our cross-border culture integration expertise for our clients.

Global PMI Partners China clients have demonstrated an increased interest in post-merger integration and an increased awareness of the need to improve the skills of their internal teams for integration. We see additional opportunity in the coming year for training clients’ internal integration teams, development of comprehensive pre-close integration planning strategies, and active post-close integration of the acquired targets.

Australia/New Zealand

Global PMI Partners continued its own international expansion in 2019 through the establishment of its Australian office. With deal flow out of Southeast Asia increasing as global players seek to mitigate supply chain risks due to the US and China trade war, the new Australian office will be well positioned to assist.

Global PMI Partners Australia expects a strong start, with over half of the 300 companies responding to a recent M&A survey in Australia & New Zealand indicating that divesting non-core assets is a top priority in the near term. Additionally, over ¾ of the companies responding believe that cross-border deals with Southeast Asia and North America will be the most attractive.

Predictions for 2020

As the global conditions for 2020 M&A activity begin to emerge, Global PMI Partners sees three main themes influencing the industry in the New Year:

  1. Digital transformation will continue to drive global M&A activity in all sectors, as more strategics seek to acquire capabilities to remain competitive, and tech giants consolidate to survive.
  2. Economic conditions and global politics weigh heavily on the markets, with the impact of the US/China trade war, Brexit, and a possible global recession posing credible risks to global M&A.
  3. Acquirers are maturing, recognizing the importance of post-merger integration and the need for trained and engaged internal leadership, which will impact which targets are picked and how they are integrated.

Global PMI Partners helps plan and execute the complex operational, technical and cultural issues that are so critical to M&A success. We’re always ready to talk with you about M&A integration. Contact us to make your next acquisition or carve-out a success.

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