Companies use M&A for a number of strategic reasons, including taking advantage of opportunities arising from the continuing unpredictable effects of the pandemic and/or to enable them to establish a wider strategic footing. M&A enables companies to supplement their revenues, assets, and IP, establish their capability, and acquire the best skills to strengthen their competitive positions more quickly than would be achievable organically.
Our partner Andy Haigh looks at Mergers & Acquisitions (M&A) by reflecting on McKinsey & Company’s recent Article about how one approach to M&A is more likely to create value above all others.
McKinsey & Company’s empirical research confirms that programmatic M&A is the strategy that is most likely to create the most value for companies.
“That is, carefully choreographing a series of deals around a specific business case or M&A theme—rather than relying on episodic “big bang” transactions—is far more likely than other approaches to lead to stronger performance and less risk.”
What is clear from the recent McKinsey research publication is that ‘programmatic’ M&A strategies or what might also be known as ‘buy and build’ strategies, provide the greatest impact with regards to increasing shareholder value.
“Data from the most recent decade reconfirm that companies that regularly and systematically pursue moderate-size M&A opportunities deliver better shareholder returns than companies that do not.”
Programmatic M&A is not the preserve of large and listed companies, BHP Corporate Finance (BHPCF) work with a number of companies in the mid and lower-mid markets in pursuing their M&A strategies.
Examples of key themes of ‘buy and build’ M&A that we see in this part of the market are:
- Product/service diversification,
- Geographical expansion,
- Improvement of quality of earnings,
- Acqui-hire (buying talent that would be very difficult to recruit ‘en-mass’ organically),
- Access to digital solutions.
Barriers to entrepreneurs carrying out programmatic M&A tend to be capacity and access to funding, but BHPCF’s lead advisory team can assist with both. We have experts in deal sourcing, valuation, structuring and financing, as well as being able to provide ‘manpower’ to analyse information and provide actionable insights throughout the process.
“It’s critical for executives to remember that programmatic M&A is not purely a volume play; it’s a strategy for systematically building new businesses, services, and capabilities. The companies that use a programmatic approach create deal flows linked to their conviction in their corporate strategy, understanding of their competitive advantage, and confidence in their capacity to execute.”
If you’re not sure whether you should be undertaking a programmatic approach to M&A or whether you have the resources or finance to lead it internally, we can help.
Furthermore, for those exploring such a strategy already; BHP has talented people across our Due Diligence and Transaction Tax teams that have significant amounts of experience in supporting your appraisal of potential targets. For more information, get in touch.