Investment professionals take a critical look at M&A transactions – DVFA column

As part of a multi-part survey of investment professionals on the subject of mergers & acquisitions carried out jointly by DVFA – German Association for Financial Analysis and Asset Management e.V. and SMS Strategic Management Solutions, the third part, which deals with the transaction background, has now been evaluated. Motives for acquisitions, hostile takeovers as well as assessments of owner structures and bidding competitions were discussed.

As in the previous parts of the survey, it can be seen that, on the one hand, investment professionals place particular value on the growth and earnings of companies, but on the other hand they are not prepared to accept extraordinary risks for this. In a large number of question areas it becomes clear that risk and return must be in a balanced relationship, especially with investment experts. “A” gamer mentality “, which the capital markets have repeatedly assumed in a populist manner, cannot be confirmed in any area, even in the slightest,” said Christoph Schlienkamp, ​​deputy. Chairman of the board of the DVFA.

In particular, the answers to the acquisition motives clearly show the balance between opportunity and risk: The three most important motives include creating new market access and access to promising technologies; Motives that can be clearly assigned to the area of ​​growth and earnings. Surprisingly, one of the three most important acquisition motives is also diversification of the business, i.e. a motive clearly geared towards risk reduction. Michael Müller, Managing Director of SMS Strategic Management Solutions, adds: “This is all the more surprising since an equally common narrative keeps claiming that the capital market only wants to see clearly oriented, so-called“ pure plays ”, which has been questioned by the present study can be.”

Economically sensible action is required by investment professionals, especially in the case of hostile takeovers and bidding competitions. In both areas, in which exaggerations can be observed over and over again, which can probably only be explained with the term “deal-fever”, the answers are clear: Hostile takeovers are only accepted as long as they are economically sensible and well-founded; Bidding competitions, on the other hand, tend to be rejected.

The more detailed information provided by the respondents also clearly shows that it is above all care, realistic planning and consideration of complexity and integration requirements that are highly valued by professionals. A system of “checks and balances” that repeatedly turns out to be positive in all areas of life is also evident in the capital market, where investment professionals have long since established themselves as an important corrective.

To fully evaluate the survey: click here.

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