<p><strong>Leif Zierz</strong>, global head, Transactions & Restructuring, KPMG, talks to <em><strong>Shailesh Menon</strong></em> on cross-border merger and acquisition deals<br><br><strong>Cross-border M&A had declined after the Lehman crisis. How’s the situation now? </strong><br>We’re seeing a rise in transaction activity across the globe. The current uptick in this is pursuant to restricted financing options and recession in many parts of the world. Some economies like those in northern Europe have recovered quickly. There are cross-border deals happening now. I’d like to say the interest in M&A deals is at pre-crisis levels.<br><br><strong>But what has changed fundamentally? </strong> <br>Some uncertainties are still there. The euro zone crisis comes back to haunt us time and again. But the transaction market is holding up well. If you look at it from a corporate angle, they have had time to reduce cost, make their balance sheet healthy, reduce debt and shore up liquidity. What has now come up is a big need to do strategic transactions (for major players), and that is happening now. A big part of the transaction market, apart from strategic players, is private equity (PE). Till last year, PE was finding it difficult to do deals, but then there’s a need for them to exit existing investments and redeploy funds. So both strategic investors and PE have begun to make bold moves.<br><br><strong>That exuberance of the previous bull market years is missing, I suppose…</strong><br>Now, companies need to justify what they are doing and show long-term value in it. There’s pressure from capital markets, shareholders and boards (of companies) to do deals that are more of a ‘strategic fit’ in nature. Firms are more focused on their businesses and core strengths. That change in mindset and professionalism has been created by the crisis. On the funding side, low-quality deals and players may not get funds for deals that are difficult to explain.<br><br><strong>Have Indian companies lost faith in overseas acquisitions?</strong><br>In 2007, India witnessed a lot of irrational deals; such exuberance does not exist anymore. Outbound deals are done for strategic reasons, only on a need-basis. In the previous years, some of these large Indian firms did not even understand the markets they forayed in; their culture. But now they’re careful. Some of those deals struck in 2007 did well because they were strategic in nature and were simple. These firms did not change much within the acquiring firms — like changing management. Post-merger integration has now become a pre-deal issue for both PE and strategic investors. <br> <br>(This story was published in BW | Businessworld Issue Dated 27-07-2015)</p>
