William F. Detwiler, General Partner at Fernbrook Capital Management; Dr. Michael Drill, CEO and Managing Director at Lincoln International; Tom Sauermilch, Partner at McDermott Will & Emery; and Heather M. Schroder, Director, Senior Legal Counsel Mergers & Acquisitions, Corporate Governance at Robert Bosch together with panel head Sarah Antor, Managing Director and COO Investment Banking Europe at Raymond James, discussed Cross-Border M&A from and to the United States and within Europe.
The panel dove right into the different effects that crossborder investments have produced in the last few years: There has been a significant shift in the market away from a predominance of global players towards smaller, mid-market companies who are the new drivers in transnational investment schemes. They boost a wellstructured organization, high-value resources and abide rigidly to due diligence-requirements.
With this evolution, new issues arise for the new midmarket players to deal with: Heather M. Schroder gave an example of the automotive industry, which is no longer homogenous, but rather has changed into a mobility service provider, thus entailing a complete market change.
Innovation is a disruption that necessitates more coinvestments, partnering and, effectively, more M&A-activity. Tech-driven brand advancements have produced new classes of investors which need to concentrate their activity on early investments—predominantly series A and B-investments—in order to gain from the operational expertise. Dr. Michael Drill focused on this path of thoughtful growth, which he has been observing as an advisor throughout the past years: Large transactions from Europe—driven by Germany—have been success stories, often resulting in 70%-takeovers, but also viceversa, there has been a strong deal-flow from the US into Member States of the European Union.
In view of the ongoing trade war and the impact of geopolitical problems, the panel also discussed the increase of China’s importance in international investments, which can be characterized as equally reciprocal, as the German Mittelstand is rapidly taking the opportunity to invest in the Asian country.
The panel identified the sectors continuing to drive cross-border investments to be software, healthcare, life sciences and mobility, and evoked the means of tech implementation available to businesses from a corporate perspective. Inhouse experts are crucial and can be organized either as centralized separate divisions or can be embedded horizontally into existing teams, thus synergizing in-depth at an early stage.
Tech as an investment sector can be seen as difficult because of the critical impact on investments of any caliber, pushed by data regulation requirements and, above all, the new GDPR. Corporate governance is as important as ever and disrupts companies fearing less growth. Especially small companies need to adapt in order to remain attractive also to public investors who don’t show any tolerance concerning diligence requirements. Statistics are not showing any downwards trend at the moment. In a mid-term approach, the panelists expect investments in the US to pay out, notwithstanding the challenging situation.
Raymond James Financial
From left to right: Dr. Michael Drill, Lincoln International; Heather M. Schroder, Robert Bosch; William F. Detwiler, Fernbrook Capital Management; Tom Sauermilch, McDermott Will & Emery; Sarah Antor, Raymond James Financial