This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Deloitte: Are Boards and CFOs in the Middle East aligned when it comes to M&A?


DOWNLOAD  

11 December, 2013- With several high value mergers and acquisitions (M&A) expected to take place in the MENA region over the coming months, the question of whether now is the time to consider an M&A growth strategy is becoming more evident.

Deloitte, in association with Corporate Board Member magazine, surveyed corporate directors and CFOs from public companies with revenue of $500 million and above, to compare, contrast, and analyze their views on M&A and risk.

The Deloitte survey, “Bridging the Gap: M&A, Are CFOs and boards aligned” indicates that industries such as oil and gas, telecoms and financial services are all expected to see more robust M&A activity over the coming 12 months. This is buoyed by the recent announced deals such as Etisalat’s offer to buy Vivendi’s 53% stake in Marco Telecom for $5.27 bn and China’s Sinopec acquisition of a 33% minority stake in Apache Corporation’s oil and gas business in Egypt for $3.1bn. With many risks and issues to consider around M&A, there is an ever growing call for more effective handling of these transactions.

Effective M&A decisions depend upon strong collaboration and communication between the board and Chief Financial Officers - CFO – especially if both parties are focused on creating value by taking strategic risks. Are board members and CFOs strategically aligned when it comes to risk management and value creation in M&A activities?

“While directors and CFOs are largely consistent in their overall view of M&A strategy and valuation, this “Bridging the Gap” survey indicates that their views could be more aligned in other areas. This is particularly the case with respect to primary M&A objectives, and especially with regard to cost synergies and scale efficiencies,” explains James Babb, CFO Program leader at Deloitte Middle East.

“Given the risks, potential benefits, and the specific roles each party plays in M&A, these transactions represent an area in which boards and CFOs would likely do well to bridge any gaps in communication, perception, and understanding. Successful M&A decisions and post-event implementation depend upon strong alignment between the board and senior executives,” he added.

Overall, the Deloitte survey results indicate that:

  • A majority of directors and CFOs agree that their companies’ M&A strategy is to seek smaller, more strategic deals. Directors and CFOs were fairly well-aligned regarding M&A strategy for the next 12-18 months, with the largest percentage of respondents in each group expecting to seek smaller, strategic deals.
  • CFOs (64%) were far more inclined than directors (45%) to cite differentiating and diversifying products or services as the primary purposes of M&A. Directors were more inclined than CFOs to cite the pursuit of cost synergies or scale efficiencies as a primary M&A objective.
  • Both directors (56%) and CFOs (53%) expect to deploy cash as the primary means of funding M&A transactions. However, CFOs are more inclined than directors to view debt as the primary source of funding.
  • Directors and CFOs agree that the greatest cause for concern in achieving M&A success is integration failure. As to the greatest cause for concern during integration, both most often cited achieving cultural fit. Other concerns relate to economic uncertainty, the changing regulatory and legislative environment, inaccurate target valuation and an insufficient due diligence process.
  • Directors were more inclined to rate the finance team’s risk-related M&A abilities as “extremely effective” than CFOs. CFOs were less inclined to rate the board as “extremely effective” in this area.

To view the full results of the “Bridging the Gap: M&A, Are CFOs and boards aligned?” survey, go to: http://bit.ly/13jnWh8  

                               Ends 

 

Last Updated: 

Material on this website is © 2014 Deloitte Global Services Limited, or a member firm of Deloitte Touche Tohmatsu Limited, or one of their affiliates. See Legal for copyright and other legal information.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Get connected
Share your comments

 

More on Deloitte
Learn about our site