March 3, 2023 at 2:51 am #76326Yeonlin Leonard LeeParticipant
Most of the M&As especially PE firms focuses on buying the company, costing cutting/restructuring to make the company’s financial look good in short term, then sell the company in a few years before the after-effect of costing cutting/restructuring starts to show. Do you think M&A experts truly understands the business and able to run a business successfully in long run?March 4, 2023 at 1:59 am #76353Craig HaslerParticipant
Thanks for the prompt.
I think a PE scenario is very different than a strategic acquisition. The size/type of the transaction (growth equity, buyout, etc) will play a role… if the deal is large enough, the acquiring PE firm could also decide to bring in external leadership with a proven track record of success in the same (or similar industry). In terms of understanding the business, those who work in the business/industry will have a much deeper understanding than any PE firm could obtain. I’ve seen deals where top PE firms have bought businesses where they’ve been sold a bag of goods that look shiny at initial glance (based on market dynamics, trends, etc) and also from a PE modelling perspective, but those within the company understand that there are gaps/headwinds with core/key technologies. This is why due diligence is so important to ensure value can be obtained. Overall, my sense is that PE companies are great at what they do (find good opportunities to create value quickly), but from a long term perspective, some short term actions (completed to generate immediate value) can significantly inhibit future business success.
All the best!
CraigMarch 12, 2023 at 8:47 am #76790Lim Cheng PierParticipant
Are senior management competent in running M&A ?March 13, 2023 at 9:18 am #76821Yeonlin Leonard LeeParticipant
Thanks Craig for the insightful reply!March 16, 2023 at 3:24 pm #76984RachelParticipant
Fabulous question and this is the key reason I am completing this course!
Typically, investment banks do not have the business leadership background to know how the merger may fail post acquisition. On the flip side, the business may have no clue what bankers need to do in order to complete a successful acquisition.
As professionals, it is our responsibility to bridge the gap to the other side. As a business leader I am taking up M&A courses to ensure I can hopefully be.useful to all parties involved!March 17, 2023 at 4:28 pm #77031Chengzhi (Roy) ChenParticipant
I generally feel that to be an M&A expert one should first have experience running businesses. So good M&A professional should be more than competent to run businesses.
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