Dr. Jens Kengelbach, Senior Partner and Managing Director of BCG Munich, Global Head of M&A and leader of the BCG Transaction Center, discussed how current price levels influence Integration Rigor.
The first 6 months of 2018 have shown a record deal activity. The M&A deal value has increased by 44 percent. Dr. Jens Kengelbach names four key drivers for this M&A activity: The conclusion of 22 mega deals in the first half of 2018, the US tax reform pumping up corporate cash offers, activist shareholders focusing on M&A and finally, private equity dry-powder continuing to strike records. At the same time, deals have gotten more expensive. In 2017, earnings before interest, tax, depreciation and amortization (EBITDA) multiples have reached the absolute record high.
There is an increasing number of deals—recently twice as often as five years ago—which announce synergies of a wide span across sectors. Generally, the markets reward the buyer’s synergy announcements. Moreover, synergy updates help investors to set up and maintain their merger models and investments thesis.
Dr. Jens Kengelbach named three things every corporate team should have “ready to deploy” during M&A procedures. First, estimated synergies should be communicated along with the deal announcement to mitigate uncertainty. Secondly, a “clean team” can be used to analyse sensitive information pre-closing to get a head start. Lastly, full potential plans help corporate acquirers to live up to the higher synergy promises and leave no stone unturned.
Dr. Jens Kengelbach,