There has been an explosion in mergers and acquisitions (M&A) activity in recent months, with H1 2015 witnessing deals with a total value of $201.5bn in the UK, already representing the highest annual total since 2008, according to Mergermarket.
In the US, data by Thomson Reuters shows M&A activity up 60 per cent to $987.7bn, the strongest first half since records began in 1980, propelled by a heady cocktail of ultra-low financing costs and a strong appetite for sector-led growth. Global M&A in turn rose 38 per cent compared with one year ago to $2.18tn in the first half, the highest since 2007.
This has worried some commentators. The frothy prices on some deals - particularly in the tech sector - or the average deal valuation has caused some to sound alarm bells on the bubble-like conditions. Some have gone as far as saying that we are heading into the direction of the 1998 and 2007 bubbles.
For a communications advisor, this is an exhilarating time. M&A presents various communications issues and challenges, and requires a meticulous and robust communications strategy that effectively advocates the case for the deal and addresses key stakeholders’ concerns.
The media focus on Royal Dutch Shell’s £47bn takeover of BG was not on the hefty price precisely due to the compelling commercial logic of the combined business’ liquefied natural gas footprint and deep water positions, which was tailored to each audience group via multiple channels. Shareholders at both companies were won over; journalists and analysts commented on the strategic merits of the deal; and, importantly, employees’ fears on job losses were alleviated, at least for now.
While the conditions for M&A are advantageous and there is every indication that deals are set to continue, boardrooms should continue to focus on the right price for the right asset at the right time (with advisors collaboratively working to sincerely support this). This is at the crux of most successful communication strategies on deals.
Failure to do this only builds the case for defence against any approach. Syngenta has the weight advantage in its sparring match against Monsanto because, according to the Swiss giant, the “unsolicited proposal failed frankly on every dimension” and the offer was "completely inadequate". The proposal was attacked at the core.
Monsanto has subsequently changed tack and is now targeting shareholders, supplemented by a PR drive to draw Syngenta’s board to the table. It has realised that communications – in all its forms - can make the difference between failure and success.
Mazar Masud is an account director at Camargue