Opportunities Opening Up for Tax Professionals With M&A Experience
The liquidity freeze may have put a damper on the mega buyout boom, but corporate executives and private equity firms say there are still plenty of deals to get done. A recent survey conducted by Grant Thornton LLP, Association for Corporate Growth (ACG), and Eureka Private Equity shows that dealmakers searching for geographic diversification will be aggressively targeting cross-border acquisitions over the next year. “Middle-market dealmakers are increasingly looking across borders to invest and grow their businesses. Cross-border M&A has truly become a global strategy. As companies look for top and bottom line growth, they are increasingly spanning the globe looking for deals,” says Daniel A. Varroney, ACG President & CEO. As private equity firms look to Europe and Asia executive recruiting firm, A.E. Feldman says experience and contacts in those markets will be in demand. The firm also reports that there is a strong need for tax professionals with transaction and due diligence experience in M&As.
Dealmakers are bullish on the current environment for cross-border M&A. A joint ACG, Grant Thornton and Eureka Private Equity survey of more than 200 U.S. active representatives of middle-market companies, investment banks, private equity firms, law firms, accountants and consultants shows that 70% anticipate doing at least one cross-border deal in the next 12 months. Almost as many, 69%, say the current M&A environment is good, while 31% call it fair.
What’s driving the cross-border merger trend? The majority of executives surveyed cite the need for geographic diversification and the availability of good acquisition candidates. “The trend to a higher level of cross-border transactions is permanent, and unlikely to be reversed by transitory speed bumps in the debt markets and other phenomena,” says Harris Smith, Grant Thornton LLP West Region Managing Partner, and ACG Vice Chairman.
Thomson Financial’s second quarter 2007 Mergers & Acquisitions Review reports that cross-border activity accounted for a record 47.5% of worldwide activity for the first half of 2007. “Especially in the United States, a lot of private equity and corporate dollars are chasing fewer and fewer deals, forcing U.S. dealmakers to look elsewhere to deploy capital,” said Paul Stewart, ACG Chairman and Principal of PS Capital Partners. A July survey conducted by ACG and Thomson Financial also found that nearly half of the corporate executives and M&A professionals polled anticipate doing deals in Western Europe. Canada and China are also popular targets for cross-border transactions.
On the flipside however, executives surveyed by Grant Thornton, ACG, and Eureka Private Equity say the biggest barriers to cross-border M&A are inadequate dispute resolution, insufficient protection surrounding intellectual property, cultural divides, and the inability to do proper due diligence. “Effective M&A requires careful planning, consideration and guidance from advisers who understand the strategic, legal or regulatory, accounting and tax ramifications of a transaction”, adds Grant Thornton’s Smith. “Approaching a cross-border transaction with an understanding of the added layers of cultural and language differences, legal and regulatory complexities, and business environment issues in all relevant geographic areas is an essential ingredient for ultimate success.”
Going forward, ACG and Grant Thornton anticipate that as cross-border M&A activity surges, international regulatory, economic and judiciary standards will converge. The firms also predict that accounting standards will need to be transparent across borders and that more specialized financing products will be developed to facilitate the ability to finance M&A in emerging markets.
