With a year of global economic downturn behind us, global consultancy major Deloitte Touche Tohmatsu believes that companies are ready to deploy cash in merger and acquisition activities, which will lead to significant changes in leadership structures.
Our M&A professionals are not on the beach. They are on the field, as our clients are looking at the crisis as an opportunity to acquire assets and indulge in M&A activities and this is taking the global perspective into consideration, said Jim Quigley, chief executive officer of Deloitte Touche Tohmatsu.
He asserted that after discussions with companies all over the world, the trend of business consolidation through partnerships and acquisitions was catching up and companies were already working out deals of such a nature.
M&A activities will show a rise, as deals will be worked out by companies which they have not announced yet. There will be a significant rise in the deployment of cash by companies from their sidelines, Quigley added.
This comes in the backdrop of Deloitte itself making an acquisition of Bearing Points North American public services practice. The deal, concluded in May this year, was worth $350 million. Quigley stated that Deloitte would continue to look for firms worth acquiring in the coming months.
Mergers and acquisitions activities, which were in vogue in the pre-economic meltdown period, hit rock-bottom after the collapse of Lehman Brothers in September 2008.
M&A activities have not quite picked up even though recovery talk is doing the rounds, as companies are still apprehensive about using their reserves to acquire other businesses and assets.
In India, during the first half of 2009, both M&A and private equity deals registered a drastic fall compared to the same period of the preceding two calendar years.
The total value of deals (M&A and PE) announced in the first half of 2009 was $7.81 billion, as against $ 23.02 billion and $50.75 billion in 2008 and 2007, respectively. The total number of M&A deals announced during the first half of 2009 stands at 123, with a total value of $4.93 billion.
Despite the downturn, India has been one of the few countries in the global Deloitte network that has seen a 30 per cent increase in employment in 2007-08. The company expects to take the employment level to around 15,000 from the current level of 11,500 in the next three years.
Quigley also elaborated on Deloittes new advisory strategy of telling companies that a crisis is a terrible thing to waste, as it provides opportunities which will yield fruits in the long term.
He said that trends that have emerged from the crisis are that companies have become more aggressive while reviewing their cost structures and they are giving greater importance to improvising client or customer relationships to create sustainable brands.