M&A Symposium Discusses a Challenging Business in an Optimistic Market
By Aaron Toomey '14 | april, 2013, Issue 1
Mergers and acquisition specialists from around the globe converged on Chicago on Apr. 11 to discuss the state of the M&A market for the 2013 IMAP International Mergers & Acquisitions Symposium. Just steps from Chicago Booth's Gleacher Center, the Trump International Hotel played host to hundreds of professionals in banking, finance, tax and consulting.
The conference, hosted by Chicago's own Dresner Partners (founded by Steven Dresner, class of '82) was an opportunity to hear from and network with M&A leaders from around the world, as well as get their thoughts on the future of the global deal market. The verdict: While M&A remains a complicated, challenging business, 2013 appears poised to be a great year.
The Symposium focused primarily on cross-border M&A in the middle market, a business that presents its own unique set of challenges. The featured speaker, Cheryl Beebe, CFO of Illinois-based Ingredion Incorporated, detailed some of these in a case study of her company's $1.3 billion acquisition of National Starch. Ms. Beebe described some of the intricacies inherent in cross-border deals, from complications with regulation, integration, financing and taxes.
"M&A deals can be made or broken based on the structure and the tax effects," said Ms. Beebe.
The deal was so complicated, with so many interactions, it affected nearly everyone in the organization, from Treasury, to HR, to Accounting. The lesson, according to Ms. Beebe – if a company is going to seriously pursue a cross-border company or asset, it should understand the complexities and make sure it's worth it.
"This was a once in a lifetime transaction. It was the right place, the right time, with the right asset – and we didn't overpay," said Ms. Beebe.
The Symposium then hosted a panel of bankers from Europe, Asia, Latin America and the US to discuss the state of the M&A market in each of those regions. Moderator Omar Diaz of Dresner Partners sounded an optimistic tone.
"We are extremely bullish on M&A," he said, citing robust equity markets and the large balances of cash in the private equity industry.
A consistent theme throughout the panel was the importance of emerging markets in the M&A industry.
Gilberto Escobedo of Mexican IMAP member Serficor Partners noted that, "Emerging markets are becoming very, very important to the global economy," with Mexico seeing a 60% increase in the number of transactions in 2012.
China is also an important market for the industry that, alongside its staggering growth, faces challenges. Eduardo Morcillo, Managing Director at Chinese IMAP member firm InterChina, noted that the number of middle class Chinese is expected to grow to 600 million by the end of the decade, up from 200 million at the beginning.
That increase in middle class buying power means "booming growth in health care, retail, food and beverage. The only way to keep the pace of growth is through M&A," said Mr. Morcillo. But, Mr. Mocillo said, Chinese growth must eventually temper. "The first generation of private business owners is used to 25, 30, or 40% growth and 30 times P/E multiples. That will eventually come down," he said.
The second and final panel of the day brought together a host of industry experts to discuss the challenges and nuances of cross-border deals in a discussion entitled "Completing Successful Cross-Border M&A Transactions." The overarching theme was that bankers, executives and business leaders need to ensure they have the right team in place and work collaboratively. According to moderator Brian Graves, class of '91, of Dresner Partners, fully two-thirds of M&A transactions fail to create value for the purchaser, and with the added complications of cross border deals, that number can be even higher.
Panelist John Dickey of law firm Dykema Gosset PLLC summed it up by saying, "You have to look at all the details and check all the boxes. You have to have the right team in place. Collaboration is vital to give a cross-border transaction a chance of creating value."
About the Hosts
IMAP is a global partnership of leading M&A and corporate finance firms providing premium M&A services focused on the middle market. IMAP consistently ranks in the top five middle market M&A advisors.
Dresner Partners was founded by Steven Dresner (University of Chicago GSB class of 1982) in 1992 and is one of Chicago's premier middle market investment banks. The firm provides a complete range of sophisticated investment banking advisory services.