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JBR ROUNDTABLE: CAN THE SUCCESS OF A TRANSACTION BE GUARANTEED? WHERE CAN DATA AND QUANTITATIVE MODELS ADD VALUE?

September 24, 2020

The Round Table on 16 September 2020 was a great success for us. More than 29 leading participants responded to the invitation.

The spacious room in Hotel Figi was thus filled with high-quality knowledge about mergers and acquisitions. The theme 'successful transactions' was explained in an accessible way by the three presentations by Hans Schenk, Hans Spaan & Tim van Luxemburg and Rik van Meirhaeghe, from their field of knowledge and vision.

They addressed the questions:

  • What factors determine the success of a transaction?
  • Does the more accurate calculation of synergy benefits put you in a better position to make a bid?
  • Does focusing on synergy actually lead to the failure of a transaction?
  • What role do chance and experience play?

 

DE FUSIEPARADOX

Hans Schenk, Emeritus Professor of School of Economics, Utrecht University.

He started by defining a theoretical framework for M&A and transaction success. Based on empirical research on transactions of listed companies, he showed that the majority are not successful. In the historical data presented, the dynamics and cyclicality of the M&A economy were evident: After periods of few transactions, a contagion effect, in response to a first-mover's transaction, triggers a wave of M&A activity, with the likelihood of value creation decreasing the further into a wave one is. This dynamic is therefore one of the reasons why many transactions are unsuccessful and hints at when better times for acquisitions are. However, there are many factors that show significance for deal failure and all of them are only a limited part of the explanation.

 

FROM EXPERIENCE DRIVEN DECISIONS TO DATA DRIVEN DECISIONS

Hans Spaan, Director Consulting ORTEC and Commissioner

Tim van Luxemburg, Industry Lead Maritime/ Data Scientist ORTEC

Hans and Tim discussed what Data Science and Optimization actually are and how these competencies and M&A experience or domain expertise can complement each other. Using examples they discussed how quantitative competencies can contribute to a higher success probability of transactions: Assessing synergy potential in the pre-transaction phase and realizing it post-transaction. Do these skills in combination with the right experience have disruption potential for the M&A industry?

 

VALUE CREATION AND DESTRUCTION IN M&A DEALS

Rik van Meirhaeghe, Partner JBR Belgium

Rik talked about his experiences as program-buyer at SPIE and his own research into transactions. A clear distinction was made between the private and public (listed) markets: private market characteristics create opportunities that are not available in public markets, making M&A a winning game. It is stated that multiple arbitrage still seems to be the biggest factor for value creation. However, too much focus on synergy is often one of the biggest valences. Synergy benefits are often difficult to realize in practice and direct integration of an acquired target actually gives the risk of value destruction. The focus should first be on maintaining stand-alone value and on growth. Only after the buyer knows the company really well, can integration follow.

 

ROUND TABLE DISCUSSION

During the discussion round we discussed these topics, among others:

  • What are the dynamics of the corporate and M&A ecosystem?
  • The differences between the public and private markets
  • Which segments perform well in M&A and where is value creation possible?
  • The long-term survival rate of firms after PE divestment combined with leverage pressures.
  • The role of the size and character of both targets and buyers.
  • The motivations of acquisitions.
  • The definitions of success/ is value creation always the goal.

 

NATAFLES

An interesting discussion ensued, providing food for thought for the PE managers, directors and advisors who attended the evening. The participants discussed the new insights into the success of transaction at a responsible distance during drinks in hotel Figi.

The real 'food' followed afterwards during a delicious dinner, the discussion broadened and we enjoyed the visions on value creation within M&A. Also under the well maintained corona measures there was enough room for further acquaintance between the participants.

 

We thank everyone for this substantive and enjoyable meeting.

 

JBR ROUNDTABLE: CAN THE SUCCESS OF A TRANSACTION BE GUARANTEED? WHERE CAN DATA AND QUANTITATIVE MODELS ADD VALUE?