Asia Mergers and Acquisitions
Mergers and acquisitions can be an effective way to grow in Asia. In a region involving many different cultures, economies, and political and regulatory regimes, merging or acquiring a local entity can enable companies to capture the benefits of local knowledge to grow their business. However, M&A is risky. Studies have shown that only 30% of large deals create value, and many actually destroy it.
To ensure M&A activity is effective a discipline approach to the process, understanding the challenges presented by different countries is imperative. At Woodward Partners, we suggest a systematic approach to any merger or acquisition that involves the following steps:
• Develop a clear understanding of your objectives from any merger or acquisition.
• Perform a detailed analysis of the market to understand the customers and the operating environment. As Woodward Partners advisor Professor Robert Salomon explains, "it is much easier to estimate demand where we know what a country's population is, we know what their disposable income looks like, and we know what GDP per capita looks like."
• Perform a detailed analysis of your product, market, finance, and competitive position. It is important not to overestimate the benefits and underestimate the costs of the activity to set realistic goals.
• Establish effective governance structures that will ensure communication with head office, transfer of knowledge, and ongoing evaluation of progress.
What factors should firms consider before expanding into foreign markets? How can firms benefit most from their experience and from the experiences of other firms? Prof. Rob Solomon of the NYU Stern School of Business and author of Learning from Exporting: New Perspectives, New Insights (2007) explores these questions.