Manufacturing executives are more bullish about merger and acquisition activity in the next two years as they seek strategic alliances in emerging markets, according to Deloitte's annual Corporate Development survey.
Of the 309 executives responding, 46% projected an increase in M&A transactions through 2014. But 62% of manufacturing executives said they expect to accelerate M&A activity during the same time period, Deloitte reported in its survey released May 22.
Deloitte attributed the expected increase to growing investment in developing economies and companies' need to secure scare capital.
"Strategic alliances and joint ventures can be difficult transactions, said Chris Ruggeri, principal, Deloitte Financial Advisory Services and its M&A services leader. "Nevertheless, we are seeing a notable uptick in this area. The perception of strategic alliances is changing from a last resort to a preferred investment strategy, especially in emerging markets, and companies are learning from industries like technology and life sciences that use strategic alliances very effectively to manage risk and capital."
Corporate boards appear to be playing a more significant role in the M&A process, respondents said. More than 40% of executives said their boards have become more involved in these transactions.
Corporate boards have been requesting more detailed updates and spending more time deliberating M&A proposals as they become more involved, Deloitte reported.
Fewer than 40% of respondents said their companies review their portfolios annually or more frequently to identify divestiture candidates. Ruggeri suggested companies take a more proactive approach to evaluate business value.
"A core component of corporate strategy is identifying businesses that are underperforming or noncore," she said. "Skipping this step puts companies at risk of needing to be reactive rather than proactive as performance slips or when activists draw attention to a particular business."
See also:
Four Steps to Making Mergers Work When Cultures Clash
Manufacturing Merger and Acquisition Activity Increases in 2011
