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M&A - Evolution, Way Forward, and Strategic Role of Advisors

By Harsh Gupta, Vice President, Ambit Corporate Finance

M&A has evolved over last two decades to become a core tool to achieve larger business objectives of organizations. It is no longer an activity that is explored by corporates, when an opportunity presents itself. Rather, those in corporate have started perceiving and implementing M&A activities as one of the integral functions of the firm, as are manufacturing, marketing, finance etc. Corporates increasingly prefer M&A to attain objectives like product diversification to expand product portfolio, geographic diversification to gain access/penetration into specific markets, acquisition of specific customer base, acquisition of new skill sets/technologies, forward integration for better price realization, backward integration for cost efficiencies. Similarly, corporates turn to M&A to divest non-core assets enabling them to focus on their core businesses and monetizing specific parts of business to fund growth of others parts.

The M&A advisor has a pivotal role to play, in M&A deals beginning from M&A deal conceptualization, deal process execution and deal completion. The M&A advisor with his industry knowledge and expertise will engage with his clients from the very beginning to assist them give shape & contours to the strategic objectives of the clients. This will entail several sessions between M&A advisor and his clients to understand, discuss and brainstorm the objectives of the potential deal enabling the advisor to provide the right strategic options to his clients. The advisor also provides significant inputs upfront on the regulatory framework governing the potential M&A deal and hence saves precious time and effort which the parties to the deal would end up spending if the right regulatory mechanism were not chosen to materialize the deal.

Once the deal process is commenced, the advisor becomes the overall coordinator for the deal. One of the most important roles he plays during this time is to keep the various stakeholders engaged to the deal process. The process being long and tedious can result into deal fatigue setting in, leading to loss of “committed engagement” on part of the stakeholders. The deal issues would keep coming up throughout the process with respect to various aspects like due diligence, commercial understanding between the parties and legal issues. The advisor has a thorough understanding of these issues and hence manages these issues with his counterpart advisors. It is very important that the advisor keeps his clients on-board, on both the complexities and potential resolutions to these issues. The deal issues are not confined to being “hard issues” like the ones mentioned above, but also include softer issues like family dynamics, personality traits and individual egos. Needless to say, for any deal process to result into successful deal culmination, these issues need equal attention. An experienced advisor would use his people skills to understand various personalities involved in the deal process and manage them appropriately. This becomes more important in the Indian context, where organizations are often run by promoter families. 

As mentioned, the process can sometimes be tedious and long-drawn. It needs a continuous and rigorous monitoring on part of the advisor to ensure that the deal consummation takes place within mutually agreed timelines. It is observed that deals, which do not get completed under the stipulated timelines, often lose the very objectives they were designed for.

All is well that ends well and this stands true for deals as well. Deal completion, i.e., exchange of business on sale and economic consideration between parties is the last but one of the most important aspects of the overall deal. The advisor’s job is to make it as seamless as possible and also make the deal completion stage give a smooth way to the post-merger integration process at the acquirer’s end.

The skill-sets and expertise which M&A advisory firms bring to their clients have also evolved with the evolved requirements of the clients themselves. The advisor no longer assists only with “execution” of the deal. Instead, he provides significant value addition to customers by providing his industry knowledge on the landscape, competitors, regulatory framework and actionable deal ideas. This “ideation” phase between the advisor and client has become very important and in many ways defines the relationship between them going forward. Hence, the alignment of client and advisor
even before the deal has commenced has become extremely critical.

Another evolution in the M&A advisory industry is the sectored orientation of M&A advisory firms. These days, many M&A advisory firms are focused on specific industry sectors, (banking, engineering, media consumer etc.) developing expertise and value-creating perspectives in these specific sectors.

The future holds great promises for the M&A advisory industry. As more and more corporates adopt M&A as a regular corporate activity and a strategic one at that, they will need & prefer reliable, trust-worthy and experienced M&A professionals assisting them throughout the process. It will be imperative for the M&A professional to stay relevant to their clients by providing them, thought-through, cutting-edge and comprehensive advisory services. This would require M&A professionals to continuously upgrade their own skill-sets, be more agile and be “in-sync” with their clients at all times.

 

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