Sellers not able to unlock value in M&A deals, says study
M&A deals mostly don’t get optimal value realisation for the sellers. Despite being in a more powerful position than ever before in several years, sellers feel they haven’t made most of what is undoubtedly a sellers’ market, failing to extract maximum value from their disposal process. A latest study by KPMG International into the state of the global disposals market shows that almost 50% of corporate sellers feel they haven’t maximised the value from their latest disposal. A similar view is being echoed by one-quarter of private equity (PE) firms. The study says that many sellers experience a wide range of issues post-completion, which typically result in value leakage. In fact, over two-thirds of corporates and PE firms admit to experiencing post-completion issues. Some of the most prevalent issues include warranty or indemnity claims, unforeseen accounting issues and completion account disputes. Interestingly, these are the same issues which featured most heavily in the previous survey, suggesting that while sellers’ processes may have sharpened up, they haven’t been able to do much to tide over them. “On a more positive note, corporate sellers have certainly upped their game—and there are distinct signs that they are learning from their PE counterparts,” said KPMG global transaction services chairman Gopal Ramanathan. “For example, corporates are putting significantly greater focus on planning and preparation aspects of the disposals process in which PE firms have typically been strong.” Over 400 merger & acquisition (M&A) decision makers were interviewed for the survey in large and mid-market companies across Europe, North America and Asia including India. Sellers also struggle during the disposal process to keep control of the timetable, the study noted. They are typically keen on a quick timetable because too long a process can prove distracting for the business being sold and its management, leading to business under-performance and value leakage. However, aggressive timetables can also limit the opportunity for the necessary planning and preparation which many sellers now realise they need to invest in. “One of the more surprising findings is that over two-thirds of corporates and PE firms state they are unlikely to change their approach towards disposals over the next five years,” Mr Gopal said. “Despite this, many sellers are changing their approach and responding to the increasing number and sophistication of buyers.” For instance, it is now widely recognised that the sales process often has to be designed to take into account the needs of multiple domestic and international trade buyers and financial buyers.