Uber bids on future with Careem, but outcome may depend on the past

01 April 2019 Consultancy-me.com

With ride-hailing giant Uber buying local success story Careem for a cool $3.1 billion during the past week, a timely report from PwC looks into creating value from M&A over the long-term. 

M&A is increasingly part of corporate activity, as companies seek to pick up market access, knowledge, new products or key talent. However, new analysis shows that value creation remains difficult to achieve, while many companies overstate their belief that a deal created value in the long term. New analysis from PwC shows that successful value creators have a long-term plan, are focused on value creation, and keep their eye on engagement with management and the retention of key staff.

M&A has for the past decade boomed, as private equity (PE) players and corporates have both sought to acquire companies; the former to boost, among others, their portfolio holdings in a period of high-speed growth and low-cost credit, and the latter to augment their innovativeness, expand product lines or access new markets. M&A deal value hit recent record levels in 2015, at $3.8 trillion, before falling marginally to $3.4 trillion last year.Value creation in acquisitions and divestmentsYet, acquiring companies remains a risky proposition, with outcomes not always positive for long-term growth. Current market turbulence is creating value uncertainties, while rapid technological change and global regulation environments contribute further ambiguity. Landing deals that prove to have long-term value has become ever-more tricky. To better understand the market, PwC recently released its ‘Creating value beyond the deal’ M&A report – with a specific focus on value creation post deal-making.

Among the firm’s findings; many companies are overly optimistic about the value created by a deal. While 61% of buyers believed that their last acquisition created value, the study found that 53% of respondents underperformed their industry peers on average based on total shareholder return (TSR) over the 24 months following completion of their last deal. When divesting, the study also found considerable levels of underperformance, with 57% underperforming their industry peers, on average, in terms of TSR for the same period.Initial M&A strategic focus and alternative prioritiesThe report contends that one of the issues faced by many companies is their failure to make value creation a key strategic focus from day one of the process. The survey found that 34% of acquirers made value creation a priority on deal closure, with 66% stating it should have been a priority from day one. In addition, the study found that strategic vision rather than opportunism is a cornerstone for long-term value creation – demonstrated by the broader strategy brought to deals by 86 percent of those who believed the last acquisition created significant value.

Yet, while strategic decision-making is a key part of value creation, PwC furthers that any such planning necessitates deeper consideration than a simple box-ticking exercise – requiring, rather,  strategic direction. For divestment, poor performers in terms of value creation were much more likely to say that there was no blueprint for action, at 87%, compared to those whom were successful in value creation, of which 99% said there was a strategic plan in place.Retention rates for key staff in successful acquisitionsLastly, various aspects of planning require key information, such as thorough due diligence. Yet, for successful value creation, there are less tangible and measurable areas of a business that also require attention. For instance, engagement with management – a focus on aligning cultures – is believed by 89% of respondents to drive more value. Furthermore, for acquisitions, considerable focus on key employees at the acquired company remains key to retaining value.

Here, 82% of companies that said significant value was destroyed lost more than 10% of key employees post-deal, while 50% of those citing significant value creation lost fewer than 5%. On the flip-side, no company which claimed significant value creation lost greater than 20% of its key retention targets – yet this occurred in 42 percent of cases of poor value creation. Indeed, it also happened for poor performers when just 11-20% of its desired employees departed.

“Deals that deliver value don’t happen by accident,” concludes seasoned M&A and divestiture specialist Bob Saada, current Deals Leader for PwC in the US. “Transactions should be an extension of your corporate strategy instead of a sudden opportunity. Companies that invest time in strategy, follow that course, and avoid chasing a shiny object just because it’s available will have a much better path to success.”

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JBR advises maritime services firm Boskalis on Horizon buy in the UAE

07 March 2019 Consultancy-me.com

Dutch maritime services provider Royal Boskalis has acquired a majority stake in UAE geotech company the Horizons Group, with strategy and corporate finance firm JBR among the advisors.

The Dutch maritime services provider Royal Boskalis Westminster (Boskalis) – a leading global dredging and offshore contractor with operations in 90 countries and 10,000-plus worldwide employees – has picked up a majority stake in the UAE’s Horizon Group, with the deal advised on by Netherlands-based corporate finance firm JBR together with global law firm Freshfields Bruckhaus Deringer.

Established in 2004, the Sharjah-based Horizon Group primarily operates in the Arabian Gulf and the Red Sea with the provision of geophysical surveys and geotechnical services – via a fleet of seven large and five smaller survey/geotechnical vessels along with a range of other technical equipment – counting national oil companies and international oil & gas industry contractors among its clients.

The purchase will complement Royal Boskalis own existing fleet of more than 900 vessels and floating equipment. “Through this transaction, we are adding an important strategic position to our existing marine survey and subsea geotechnical business. Horizon is a market leader in the Middle East and we are committed to continuing and expanding the high quality of services they deliver to their clients,” said Boskalis CEO Peter Berdowski. JBR advises maritime infrastructure firm Boskalis on Horizon buy in the UAEBoskalis has altogether picked up a 62.5 percent share in Horizon – with revenues in the 2018/2019 financial year expected to exceed $100 million, adding to annual Boskalis revenues regularly in excess of $2.5 billion (the company is scheduled to release its full year 2018 results today). The remaining 37.5% stake, meanwhile, will continue to be held by the incumbent Horizon management according to a press release from Boskalis.

Along with legal support from international law firm Freshfields Bruckhaus Deringer, the more than a century-old Dutch company received M&A guidance for the transaction from fellow Netherlands-based corporate finance firm JBR. The M&A firm's deal team, which has come to be a trusted advisor to Boskalis in recent times, consisted of Kees van Biert, Rick ter Maat, and Mirthe van Schrojenstein Lantman.

Previously, JBR – which also provides cross-sector services in the areas of strategic consultancy, restructuring and interim executive staffing – supported the 2016 sale of Boskalis’ stake in SMIT Amandla Marine for approximately €50 million. The advisory firm has also helped Boskalis in the establishment of a number of joint ventures.