Crisis prompts "express M&A"
Global financial turmoil has prompted a dramatic acceleration in the speed at which mergers are consummated, possibly storing up problems for hasty acquirers, a survey released on Monday said.
M&S strikes deal to expand in eastern EuropeDeals in 2008 have taken just 80 days from announcement to completion - almost halving from the year before, when the average acquisition took 142 days, according to a survey by Towers Perrin, a professional services firm.
The shift was driven by banking crises and by non-financial companies snapping up bargains, said study author Marco Boschetti.
"In the financial sector, clearly it's pushed by companies that would otherwise be collapsing, and governments are intervening to encourage deals to be closed quickly," he said.
Elsewhere, Boschetti said, cash-rich firms were "seeing some cheap assets and deals in the market and are snapping them up."
Aside from shotgun mergers between banks, he said, the wave of "express M&A" included industrial deals such as Tata Motors's $2.3 billion (1.4 billion pounds) purchase of Jaguar and Land Rover, done in 67 days, and Royal Dutch Shell's takeover of Duvernay Oil, concluded in just 40 days.
The study, which covers mergers worth $2 billion-plus, comes amid a sharp slowdown in global mergers and acquisitions (M&A).
Thomson Reuters data shows that at $2.5 trillion, deal volume for the year to end-September was down more than a quarter from last year, while deals worth $87 billion collapsed between September 1 and October 10 as the financial crisis intensified.
Deal prices should leave some leeway for surprises such as large pension liabilities, and with less time to plan integration, acquirers should focus on stumbling blocks like making sure key personnel do not defect, Boschetti said.
"If you don't identify the talent, and make sure that they stay, then the company that you buy even for 10 pence in the pound, is going to be worth zero," he said.
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