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EXCLUSIVE INTERVIEW

Laura Tenison

our workforce is totally diverse, we employ people from every area of the world

$104bn

René Carayol if it had been the lehman sisters, they may well still be with us

Simon Ashby when it comes to m&a, beware the executive egos

MERGERS & ACQUISITIONS

cheers! the mega brewer set to dominate the world’s beer market

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Business Reporter

Opening shots René Carayol

E

QUA L PAY DAY wa s on November 9 but, just like everything else about the vital and necessary debate around women in business, it just didn’t have the necessary prominence or positive media coverage.

Equal Pay Day is essentially the day in the year that women stop earning relative to average men’s salaries. Therefore, women effectively stop getting paid on November 9, while men continue to receive salary for the rest of the year.

The average female full-time worker in the UK earns 14.5 per cent less than her male counterpart – or 85.5 pence for every £1 earned by a man.

That means, relative to men, women effectively are not paid a penny for the final 52 days of the year. How can that be right?

Jayne-Anne Gadhia, chief executive of Virgin Money, recently presented a set of proposals focused on tackling the gender imbalance of women in finance, after a government-commissioned study.

Her most innovative recommendation was to review the bonuses of city executives, and have them directly linked to the targets for the number of women in senior roles.

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Time for today’s business leaders to admit they have their gender equation completely wrong John Mann, Labour MP and member of the Treasury committee, responded by saying: “The proposals are good and pragmatic. I think it will have an impact on bank culture, although it is not a panacea.” He also commented that a “laddish culture” fuelled the Libor-fixing scandal and this has not helped the reputation of the banks.

George Kerevan, a Scottish National Party MP also on the committee, said the issue about gender has a direct correlation to profits. “Research shows that having more women at board level improves the bottom line. We all know remuneration at senior levels in the financial community is target-driven and paid in a large measure through bonuses. So Jayne-Anne Gadhia’s proposal to link bonuses to improving

gender balance makes commercial sense as well as being the right thing to do.”

Prejudice and bigotry is rarely based on reason, so why do we try to use reason (numbers and statistics) to try to change their minds?

“Threats rarely work unless the person has something to lose,” says Pavita Cooper, chief executive and founder of More Difference. “While you may not be responsible for being held back, you need to take responsibility for getting where you deserve to be.”

Her executive search firm has decided to spark a completely different rhythm from those of the traditional search giants, and they seek what they call “game changers” who embody difference and may well plug that executive gap in a less orthodox fashion.

Nobody argues against the case for women at the top anymore – in fact, everyone appears to be willing, but still not enough actually happens. We don’t need more time – we just need more concerted action.

The real act of courage needed is for current business leaders to announce that they have got their gender equation completely wrong, then many more will try so much harder to get it right without the fear of failure.

Many have thought that if it had been L eh ma n Sisters as opposed to Lehman Brothers, they might well be still alive today.

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Lane Fox: more women needed in tech sectors

By Joanne Frearson N E W DIGI TA L i nst it ut ion Doteveryone, the brainchild of Lastminute.com founder Martha Lane Fox, is helping to get more wome n i n te c h nolog y by giving them support through venture funds.

“Only 4 per cent of the world’s engineers are women, about 10 per cent of the world’s venture capitalists are women and about 10 per cent of the world’s tech companies are founded by women,” said Lane Fox at Microsoft’s Future Decoded event in London last month. “You might raise your eyes and think ‘Why does that matter?’ I would argue it was much less economically viable to discount half of the world’s population and not to be engaged in a huge amount of talent that could be part of this incredible revolution, but also help with all those jobs. “ T h e r e a r e 8 0 0 ,0 0 0 unemployed women in this country right now. I have met so many different groups that help train people and get them into digital jobs – surely some of them can start filling those jobs we are trying to fill. We should be equipping women with the digital tools of the future.”

the tech gender gap 10

of venture capitalists worldwide who are women

10%

of tech firms worldwide founded by women

4%

of engineers worldwide who are women

%

1,000,000

vacancies in the UK tech sector by 2020 By 2020 it is expected the UK will need a million jobs filled in t he tec h nolog y sec tor.

Doteveryone’s first project to help women will be a fund aimed at supporting female tech entrepreneurs.

She says: “I really thought, when I was a 25-year-old working on the lastminute. com journey, that this would be the incredible democratised force for good. And in many ways it

has been. The internet is awesome – every day it takes my breath away – but I also feel profoundly disturbed when I look at the numbers of women engaged in ou r e xc it i n g, s uc c e s s f u l , empowering, rich sector.

“We want to take a role in something I feel very strongly and continuously surprised about, which is the absence of women in this new world of technology.”

Lane Fox originally outlined her vision for Doteveryone in her Dimbleby lecture, which she gave

earlier this year. After a successful online petition demanding the government start the project, Doteveryone was born.

Its aim is to be a digital institution, focused on the internet revolution, with a mission to help society prosper through the use of digital technology. Research has shown it is economically beneficial for UK citizens to have digital skills. A report undertaken

by Go ON UK (established by Martha Lane Fox) in conjunction with the Tinder Foundation, found that if the UK invested £1.65billion into skills provision and digital devices over the next 10 years, the economy would save £14.3billion, with a return of almost £10 for every £1 invested.

The research, produced by Cebr, also showed that this investment would massively increase productivity for the UK and boost net earnings by £358million for the 926,000 strong workforce currently lacking digital skills.

Lane Fox says she wants Doteveryone to work for everyone, championing the skills crisis, digitally empowering people and unleashing the potential of women to be involved in technology.

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Three in a row!

Business Reporter shortlisted for top journalism award THE QUALITY of the journalism at Business Reporter has once again been confirmed as we have been shortlisted in the Journalism of the Year category of the IRM Global Risk Awards 2016.

“It’s a terrific accolade for us,” says Business Reporter MD Bradley Scheffer. “It shows how seriously we take our coverage of risk management. Both commercially and editorially, we understand risk management and what is important to the people in the industry.”

This is the third time Business Reporter has been recognised by the IRM. Editor Daniel Evans said: “We are the only media group to have been shortlisted three times. We won the inaugural IRM award for risk management journalism in 2014 and made the shortlist again in 2015. To be back on the shortlist for 2016 is no fluke – it shows how consistently well we cover risk management from all angles.”

This year’s shortlisted coverage involved three exclusive interviews by Joanne Frearson with The Risk Enforcers – a hostage negotiator, a fighter pilot and a poker player – whose day-to-day life demands assessing risks coolly and quickly, and who talked about how their experiences translated into managing difficult business scenarios.

The winner will be announced at the IRM’s black tie awards dinner at the London Hilton on Park Lane next year.

How do you engage someone in a few seconds, and keep them engaged enough to monetise their interaction?

Find out the answers to this and more at DCS 2016.

For inform more a DCS 2 tion about 0 call Gr 16 please ant on +4 Scheffer 4( 8349 0)20 6478

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Time to get on track Why a more diverse workforce would benefit the whole rail and construction industry

T

oo often, it seems to me that the rail industry is stuck in the past. One stark example is that the rail sector is not hiring, or promoting enough women. As a result we are missing out on the skills and perspective of half the population.

A recent report published by Women in Rail spells out the problem. It found that out of the 87,000 people working in rail, only 13,500 are women. Just 15 per cent.

Of those, half work in the operational, customer-facing parts of the railway, such as catering, ticketing and station retail. These women are often the face of the rail industry, the people passengers come into contact with on a daily basis, but they are not representative of the industry as a whole. Back office, engineering, maintenance and senior management are still very much the preserve of men.

To an outsider, it would rightly seem shocking that only 4 per cent of rail engineers are women, or that only 0.6 per cent of women have progressed to director or executive level. Yet this is what we’ve come to accept as the norm. That has to change.

It has to change, not just in the interests of women, but in the interests of the rail industry as a whole. A more diverse workforce would benefit the industry. Put simply, the wider the range of skills and experience brought to bear on a problem, the better the decision will be.

Other sectors learned this long ago. Among FTSE100 companies, around a quarter of board members are women.

All-male boards are a thing of the past. Half of solicitors are female, and the majority of GPs. I believe HS2 presents a unique opportunity to make a step change in equality and diversity, but it’s not going to be a quick or easy process. Making the rail sector – and the wider construction industry – more diverse will be a generational challenge. At HS2 Ltd we are proud to have 46 per cent women in our workforce, but I know that’s going to be challenging to maintain as we move into the construction phase. That’s why it’s so important that we work to change young people’s image of engineering and construction and get more young women into the profession at the start of their careers.

Far from the old stereotypes of coal dust, grease and hard labour, the modern rail engineer is far more likely to be involved in programming, digital design, control and hi-tech manufacturing. HS2 will be the first major UK transport project built entirely in the digital realm before we put a single spade in the ground, using BIM Level 2 from day one.

At the peak of construction, in the mid 2020s, we expect more than 24,000 people to be working on the project, either on site along

the route, or across the UK-wide supply chain. It is clear that to meet the unprecedented scale and nature of this demand, the rail and construction industries need to prepare for a hi-tech future. We need to attract the brightest and the best engineers and project leaders to drive the industry forward, whoever they may be and whatever their background.

I believe that high-profile rail projects like HS2 have the potential to transform the image of the industry. Much of that starts in schools. Statistics show that our education system currently produces only 60 per cent of the engineering graduates we need. Encouraging more young people to study Science, Technology, Engineering and Mathematics (STEM) subjects will not only benefit HS2, but also the wider economy. That’s why we’re engaging with schools through our educational programme.

We have already trained more than 100 staff as STEMNET ambassadors to support our expanding programme of schools engagement, delivered more than 25,000 hours of engagement working with organisations such as the Smallpeice Trust and the Construction Youth Trust. The new National College for High Speed Rail will also help by creating a clear career path through to rail engineering jobs. A one-stop shop for the next-generation skills and expertise we will need to build HS2 and a beacon of excellence for the industry as a whole.

As well as creating the opportunities, we also need to change the way we work. There’s no shortage of research to suggest that women and minority groups have more negative experiences and impression of the

“Far from the old stereotypes of coal dust, grease and hard labour, the modern rail engineer is far more likely to be involved in programming, digital design, control and hi-tech manufacturing”

engineering and construction industry than your typical white male. But let’s be honest, the average white male in the sector isn’t having it easy either. Long hours, false self-employment, zero-hours contracts and difficult working environments are all too often the norm.

It doesn’t have to be that way. And to attract the brightest and the best of the next generation it can’t be that way.

At HS2 we will put fairness, safety and respect at the heart of everything we do. We will be paying the living wage to all our people – regardless of age – and we aim to create more than 2,000 apprenticeships at a range of levels, from school leavers, to graduates and beyond.

We are committed to equality, diversity and inclusion. It is the smart way to do business, as well as the right way – and it is the only way to attract and retain the talent of tomorrow.

Simon Kirby (left) is chief executive of HS2.

Find out more about what your company can do to encourage more young women into the industry at constructionyouth.org.uk/not-just-for-boys

December 2015

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2015 awards set to honour women in business

Karen Betts, one of last year’s everywoman award recipients

THE NATWEST everywoman Awards, being held tomorrow in London, celebrate female entrepreneurs and represent women from all points on the business spectrum, from those leading multimillion-pound global empires and women spearheading social enterprises for the greater good to start-up founders.

This year there were 19 women unveiled as finalists, including one who began working aged just 16 to support her family and is now turning over millions, a future music mogul who is set to turn the

streaming industry on its head, and a savvy beauty expert who spotted an opportunity to purchase a failing business and completely reinvent it.

A couple of new categories have also been announced this year. The first is the Aphrodite Award, which recognises the numerous mums who have juggled the challenges of bringing up young children while launching their business dreams.

The second new category is the Brand of the Future Award, which will be presented to a woman whose early-stage business is seen to

demonstrate huge potential for growth.

The event will also honour high-profile names in the industry.

The winner of the Spirit of everywoman Award will be announced, where past recipients have included Dame Stella Rimington and Karren Brady, as well as the everywoman Ambassador Award, with previous winners including Jo Malone MBE and Kelly Hoppen MBE. Maxine Benson MBE, co-founder of everywoman, says: “Thirteen years ago, there were very few role

models who women could identify with, and that’s why we launched this programme. Today it is commonplace to read of women starting a business, but the extent and scale of their success is often overlooked.

“That’s why this year we amended our award criteria, and the categories now reflect the age of the business, not the individual. It is crucial to shout about the success women are achieving, sometimes in a short space of time, and often having established sustained growth over many years.”

Getting down with the millennial generation Joanne Frearson talks to entrepreneur Rupa Ganatra about setting up the world’s first business summit for millennials RUPA GANATRA is a female entrepreneur who has successfully gone through the challenges of starting a business. Her latest venture is a series of summits designed for businesses targeting the millennial generation.

Talking to Business Reporter about her experience, Ganatra explains the ins and outs of founding a business and advice for other women starting out.

“I come from a family of entrepreneurs and it was not uncommon for business ideas to be discussed around the dinner table at an early age,” she says.

“My parents arrived in the UK from East Africa in the early 1970s, but they had left everything behind in Uganda and had to start from scratch. We were kind of born around entrepreneurship as a way of living.”

Ganatra is now a serial entrepreneur and has started three businesses. Her first was a digital content online publication started with an ex-journalist, called BoE Magazine, designed for UK entrepreneurs in the tech, healthcare, lifestyle and travel industries.

Her second business was Yes Sir!, a men’s cosmetics and grooming online retailer.

Her latest venture is Millennial 20-20, the world’s first millennial business summit, with more than 3,000 brands, companies, founders and start-ups exploring the game-changing millennial-driven marketplace. Ganatra says: “Over 50 per cent of new businesses are being started by millennials. The generation is well educated, entrepreneurial and business-savvy, and many of them want to change the world.”

The two-day summit, which she co-founded with entrepreneurs Viktoria de Chevron Villette and Simon Berger, is taking place in London and will focus on

four industry tracks, host 150 world-class speakers, 40 experiential exhibitors, live immersive showcases and networking opportunities through the event.

Key speakers include ex-footballer Rio Ferdinand, restaurateur and Wagamama founder Alan Yau, Intercontinental Hotels CEO Angela Brav, Formula-E CEO Alejandro Agag, FarFetch CMO Stephanie Horton, as well as many more speakers representing companies such as PepsiCo, Selfridges, Uber, Trip Advisor, Cambridge Satchel Company, McDonald’s and Jamie Oliver.

Ganatra has plenty of advice for other women who want to set up their own company and feels starting a business can be challenging whether you are male or female. She says: “Take risks and do not be afraid

“Go in with your eyes open and be prepared to work hard – I genuinely believe that the harder you work the more luck you create” of failure. It allows you to start again more smartly and is an invaluable learning opportunity. Sometimes what you thought was your strongest unique selling proposition may not be. You may recover other revenue opportunities that you did not know about when you just started.”

What has been invaluable for Ganatra is finding mentors. She says: “It can be really daunting when you start out on your own. I was incredibly surprised when I started out by how many people were willing to give you their time or willing to help, even if it is just a 30-minute coffee to bounce some ideas.

“They can also open doors that would take someone starting out 10 times longer to open. It is that helping hand that is really important.”

What Ganatra thinks would help women in business, especially those in the millennial generation, is education. She would like to see entrepreneurship

built into the school curriculum.

Ganatra stresses the importance of building a network before you need it, and outlining what the responsibilities of different partners are in a joint venture.

“Somebody gave me this advice very early on at the start of my journey and it is invaluable,” she explains. “It is really easy to get excited by the business idea and the fun parts of setting up a business, but it is often the shareholder agreement and the legal documentation which will be the most important further down the line,” she says. “My advice is if it is not written down it does not exist.”

She disagrees with others who say that women have more responsibility, with families, children and work/life balance, which makes it harder for them to start a business. “I have met many successful female entrepreneurs who manage it all and are probably more efficient and more focused in the hours they are spending on the business because of the fact they have more responsibilities,” she says. “I do not think that should deter anyone.

“There are some extremely successful businesses in the UK and the rest of the world that were started by women. Go in with yours eyes open and be prepared to work hard – I genuinely believe that the harder you work the more luck you create.

Success in entrepreneurship is a mix of those two.”

For more information about the event, check out the Millennial 20-20 website at millennial20-20.com

After founding a highend magazine and an online men’s grooming retailer, Rupa Ganatra has turned her attention towards business summits for young entrepreneurs

December 2015

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The big interview Laura Tenison

T MATERNITY retailer JoJo Maman Bébé, people come above the bottom line, says its founder Laura Tenison. It is the way she has always done business since she started the firm in 1993, and it shows in her staff turnover rate – many of the founding members are still part of her team.

Tenison grew up in the Welsh countryside and from a young age she used to come up with plans to run small businesses to find ways to make some pocket money.

She tells me “We lived off the old A40 and as an eight-year-old child I would be selling fruit and orange squash to passing lorry drivers. As I grew a little bit older, I started making clothes and selling them to my friends. That was my very first hobby business, and in effect it has turned into the global company that I run today.”

But it was only after a near fatal head-on collision that her idea for JoJo Maman Bébé came to fruition.

When she was recovering in hospital she discovered her neighbour on her ward was frustrated by a lack of good catalogue fashion for her children.

And so with £50,000 in the bank after selling a French property business, Tenison set up her quirky nautical-style fashion range for mothers and babies.

Her focus on putting people first and creating a diverse and inclusive workforce has made the business what it is today, says Tenison. JoJo Maman Bébé clothes are now available in more than 60 countries across the world, with 72 stores nationwide. She employs more than 700 people

Humans come in all shapes and sizes – a diverse workforce breaks down barriers EXCLUSIVE Joanne Frearson and has a forecast gross turnover of £55million, with plans for further international expansion.

For her work Tenison has not only received an MBE for services to business in the Queen’s New Year’s Honours list, but has won a slew of awards, including the Veuve Clicquot Business Woman of

the Year and Welsh Women Mean Business, Lifetime Achievement Award.

But she warns that starting your own business is not always an easy option. As a hands-on mother of two boys, Tenison has juggled her children with her career, and has put in long hours to ensure that neither suffers. She says: “Working for yourself requires a huge amount of self-discipline and a very deep-rooted work ethic. There is something quite relentless about it – you are always on duty, especially if you happen to be a mother.

“Your situation goes from being on duty in the workplace, and now with social media, probably

also trying to keep an eye on work at home. There is no clear divide between home life and work life anymore. You are basically on the treadmill 24/7 and that does not suit everyone. People think running your own company and juggling as a parent is an easier option – I am not sure it is, although obviously it has worked for me.”

Tenison believes women in general have a natural instinct to nurture their families at an emotional level that is in most cases stronger than men, although she is quick to stress this does not apply to all men and women. “Generally, this in itself will mean that most women will want to

A how-to guide: gender diversity in the workplace

E

ven if you aren’t a current affairs buff, you’d be hard pressed to have missed the recent news on gender equality in the workplace. The business case is clear. Bringing a greater diversity of experience and approaches helps an organisation anticipate the needs and wants of its customers.

It enables them to innovate further, equalling greater success.

But how do you actually ensure your organisation gets there? Take Sky, the broadcaster, as an example.

It’s building on a strong foundation – today a third of Sky’s senior leaders are women. Its aim is to move that to a 50/50 split.

Sky is taking a three-pronged approach to achieve this.

First, creating a level playing field for talent – this is the foundation stone. Optimising job descriptions and adverts minimises the risk of women self-selecting themselves out of roles. 50/50 balanced shortlists for senior positions ensures a gender mix at interview stage, while unconscious bias training creates interview processes that are fair and equitable, focusing on underlying skills and experience.

Secondly, the company is supercharging existing talent, helping the women already in the organisation reach their potential.

For example, Sky Sports News HQ producer Anna (far left) is one of more than 100 women benefiting from Sky’s Women in Leadership Sponsorship and Development Programme. This 12-month programme provides participants with a senior sponsor who advocates for them around the business, helping them to identify and land new opportunities.

Alongside this, the scheme offers

development and knowledge sessions on topics ranging from self-belief to strategy and finance.

Jeremy Darroch, CEO, explained why Sky decided to focus on sponsorship: “We created this programme to help talented women identify opportunities for future advancement, but to also remove any barriers that might prevent them from succeeding.

This helps ensure our senior

management team has the right gender balance.” Sky is also empowering its employees to work flexibly to get the job done, and is providing family care support, such as its shared parental leave scheme, which offers six months’ fully paid leave to new parents.

The last part of the puzzle is attracting external talent to your organisation. Finding the very best talent for the role, the team and the business is no easy task, particularly in areas where there is a more limited talent pool – but it’s a crucial part of the mix. Sky has started holding “Women in Technology” events at its sites in Leeds, London and Scotland to encourage women to consider building a tech career at Sky. There isn’t one silver bullet – it’s about a multi-faceted approach that is tailored for your organisation and industry. Creating the bestperforming, balanced leadership team will take time and commitment. However, as Bella Vuillermoz, Sky’s director of women in leadership, says: “It’s a no-brainer – it generates better ideas, better decision making and better business outcomes. Why wouldn’t you?”

Discover Sky’s leadership programme at sky.co/women

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have some hands-on time with their children, which can be a disadvantage in certain jobs,” says Tenison. “If your job involves being away from home, it is not ideal should you want to start a family.

“But I do feel only when men decide to be as proactive with their families and put demands on their employers to change the rules will things change properly. In many ways, we want men to find their more emotional side to address the gender stereotyping we have in society.”

Although she feels there is still some work to do in the area, Tenison believes gender stereotyping has regressed. “Modern technology has made it much easier to work around your children,” she says. “Working school hours and being able to finish off a couple of hours’ work once you have your children in bed does mean life gets easier.

As technology improves, being being able to work around family requirements is possible.”

Tenison feels having more than one woman on a board is advantageous. She says: “Having a single female representative in a board of men does put them in a difficult situation, and any type of diversity should be well represented as much as possible.” But she does not believe quotas are the answer to get more women on boards because she feels they are discriminatory and it is important that the best person gets the job.

“The best way to get more women on boards is to have positive role models who help and champion younger women in the workplace,” she says. “They are able to involve them in decision-

“Working for yourself requires huge self-discipline – especially if you happen to be a mother” making processes early on in their career, so building up people’s confidence and making sure they are not in a minority situation is going to address the lack of women on boards.”

At JoJo Maman Bébé, Tenision makes sure the workforce is made up of people from all kinds of backgrounds. She says: “Our workforce is totally diverse, we employ people from every area of the world as well as being very loyal to our local employees at our head office in South Wales. We also have quite a number of individuals with Down’s syndrome working for us. I feel that having a diverse workforce breaks down barriers that could have been established.

“We call everyone that works at JoJo a JoJo person, regardless of their background. Employing individuals with Down’s syndrome make the rest of the workforce more human – people are kinder to each other, less aggressive and people take care of those who need help in areas they need it.

Human beings come in all shapes and sizes.”

Tenison works with the Down’s Syndrome Association’s WorkFit programme, which trains companies on the best ways to integrate people with the condition into the workplace. Regardless of whether or not the success of her business is linked to Tenison’s workplace ethic, it is easy to see why the majority of her founding members still work for her. By putting people first, she has created a great working culture, which can only help the bottom line.

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By Joanne Frearson

T

HE PROPOSED merger between Anheuser-Busch InBev (AB InBev) and SABMiller merger is set to become the fourth-biggest corporate deal in history, and will create the world’s largest consumer staple maker – currently being talked up as the “megabrew”. The two firms make some of the world’s most famous brews. The AB InBev range includes Budweiser, Corona and Stella Artois, while SAB Miller’s products number popular brands such as Peroni, Grolsch and Pilsner Urquell.

The deal, still subject to regulatory approval, has been valued at £68billion and is expected to be completed in the second half of 2016. For AB InBev, the rationale behind buying SABMilller is to create a global beer company that will give the combined group access to high-growth regions in Africa, Asia and Central and South America.

Dr George Alexandridis, associate professor at the ICMA Centre at Henley Business School, says: “This is more of a strategic move to tackle the

$160bn pharma mega deal DRUG GIANTS Pfizer and Allergan have announced a record-breaking $160bn merger in what will be the biggest pharmaceuticals deal in history. The takeover would allow Viagra-maker Pfizer to escape relatively high US corporate tax rates by moving its headquarters to Botoxmaker Allergan’s Dublin base. Essentially, Pfizer is pursuing a reverse takeover of Allergan with the smaller company buying New York-based Pfizer. After the sale, the combined company would be renamed Pfizer PLC and continue to trade on the New York Stock Exchange.

SABMi InBev, t has som

30% nearly three out of every ten beers sold around the world will by produced by the new company

How the beer giant 200-plus £31billion

diminishing profits AB InBev has been subject to in the US. There has been an increasing demand 20.8 per cent for imported beer in the US – wine and other spirits and so on. This is impacting the bottom line of big 139 billion beer brewers. s i o t r “SABMiller brings more long-term growth tia n A potential to AB InBev. In particular AB InBev will Sebas ted Stella Budweiser rly crea be buying into Latin American countries, Colombia, the ea s a n i s i Peru and – very importantly – Africa. SABMiller A rto entu r y a of c enjoys a very substantial presence there. The middle 18th the people .

155,000 m class in Africa is growing fast. It is a very up and g if t to n in Belg iu coming beer market – Africa is the next big thing Leuve Belgium when it comes to beer. In a way, this deal may help AB InBev to resuscitate its revenue growth.”

One area Alexandridis believes could be a the big problem is the unions have opposed the Although there has been much talk about what the deal will create, it is by no means complete. In concern is China. He explains SABMiller has a deal because SABMiller was founded 120 years order to finalise the merger, the two companies stake in Snow lager in China and is likely to have ago and remains a major employer there,” still have to undergo regulatory approval in all the to sell that in order for the Chinese authorities to Alexandridis says. “There are other smaller grant its permission for the merger. “In South Africa problems – for example, SAB is a major bottler for different countries they are based in.

Coca-Cola in Africa and AB InBev is a bottler So far, to appease the regulators in the for Pepsi in Latin America. The combined US, SABMiller has sold its interest in company will not be able to continue to MillerCoors to Molson Coors. Alexandridis collaborate with both. There are a lot of says: “The anti-trust issues here are much issues to be resolved.” more geographically diverse and complex £112bn Vodafone AirTouch and Mannesmann, 1999 Generally, though, Alexandridis thinks than the previous deals the company has the market is positive as the AB InBev share done. The market is placing a 70 per cent £104bn AOL and Time Warner, 2000 price tells a different story. “If you look at probability that the deal will be completed. the market it is particularly upbeat about “The deal is far from done. Right now £84bn Verizon Wireless and Verizon Comms, 2013 this deal to create value for the acquiring SABMiller is trading for around £40 a share firm’s shareholders. AB InBev stock price – if you look at the price of the bid it is £44. £68bn AB InBev and SABMiller, 2015 is more than 18 per cent up since late That reflects the uncertainty that the deal September when the rumour broke out – 10 be completed because of regulatory £56bn Warner-Lambert and Pfizer, 2000 per cent more than the market in Belgium. obligations.”

ui z q b u P

History’s biggest M&A deals

Brands

Global annual sal

Global market sha

Bottles sold each y

Most popular prod Workforce HQ All this corresponds to about €30billion of value creation for their shareholders. This is pretty unusual because mega deals will typically see a moderate increase in the stock price, if not a decrease around the deal proposal.”

If the deal falls apart, it would be very costly for AB InBev. The brewer will have to pay $3billion to SABMiller, ahead of any other fees it has to part with to consult with bankers. Once the merger is complete, streamlining of operations and costcutting are expected. According to Alexandridis, 35 to 40 per cent of the £920million in savings AB InBev has identified will come from tackling overlaps at corporate and regional headquarters. The deal will mean job losses and office closures in the UK. “SABMiller employs about 800 people in the UK, with most in Woking and about 30 in the London office, so nobody knows at the moment what will happen to those,” Alexandridis says. “I suspect we

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ller’s merger with Anheuser-Busch the biggest beer acquisition ever, me pretty impressive numbers…

$104bn The takeover price of SAB Miller

The top four best-selling beers in America will all be made by the new super brewer…

ts compare 200-plus

les

£17billion

are

9.7 per cent

year

73.5 billion

duct

Snow Beer

(Never heard of it? That’s because it’s only available in China)

69,000 London are going to see many jobs lost. AB InBev is renowned for its focus on controlling and cutting costs. All of its management travel economy class in nontransatlantic flights and they stay in modest hotels.”

Other synergies AB InBev will drive include procurement and engineering, where there will be a combined sourcing of raw materials and packaging and a re-engineering of associated processes. There will also be an alignment of brewery, bottling and shipping productivity as well as cost-management efficiency improvements and productivity enhancements across the group’s administrative operations.

M&A and integration expert Danny A Davis says: “There will be a period of uncertainty, where people just don’t know what is going on. That really causes people problems. The customers and employees will start to think about what is going to happen. The suppliers will

Below: Dr George Alexandridis, associate professor at the ICMA Centre at Henley Business School

Pub qu iz Sout

hA Brewer frica n trace it ies ca n back to s h istor y t Joha n n he 1895 es gold r u bu rg s h.

start thinking about it and people will start to figure out what they should be doing to have their best interest at heart. Sometimes competitors use it to their advantage. If there are some key employees you would like to look at, there is a substantially better chance of stealing some.”

The mega deal is also likely to prompt other brewers to consider acquisitions. It is possible, Alexandridis says, that major competitors such as Carlsberg and Heineken “may reconsider their strategic reach” as well if the deal goes through.

He does not expect there to be a deal between Carlsberg and Heineken, but they could focus on smaller players to enhance their advantage. He believes a potential pair could be Heineken and Molson Coors, although these are only rumours.

In the meantime, assuming the AB InBev/SAB Miller merger happens, it will change the brewing industry as we know it.

9

When it comes to M&A, beware the executive egos EXPERT INSIGHT

Simon Ashby

EVER SINCE I was an undergraduate I have been fascinated by the idea of mergers and acquisitions – why should one company want to take over or merge with another? It has never really made much sense to me, so I am often intrigued as to why it should make sense to so many shareholders.

The standard arguments for mergers and acquisitions are, of course, synergy and economies of scale. Merging a company that has an excellent distribution network, with another that excels in developing high-quality products might well make sense in synergy terms. Equally, larger companies may potentially be cheaper to run – due to savings in management and other overhead costs, for example.

In rare cases an acquisition may also allow a company to purchase what are effectively second-hand assets (buildings, machinery, staff and so on) at a lower cost than it might incur if it was starting from scratch.

However, do these benefits really exceed the associated costs?

The problem is that although the financial numbers may look good, it is when faced with softer issues like cultures or mismatched systems and processes that things come unstuck. Perhaps the biggest and best example of this was the 2000 $165billion mega-merger of America Online (AOL) with Time Warner. Executives in both companies wanted to cash in on the dotcom boom and the convergence of mass media with the internet.

Yet only a year later the combined company reported losses of $99billion. True, the bursting of the dotcom bubble did not help, but also key were communication issues (particularly acute in a company with 90,000 staff), turf wars between executives, and culture clashes. The merger of Chrysler with Daimler Benz is another good example of culture clash, and I suspect many of us still wince when we think about BMW’s acquisition of Rover.

Of course, that is not to say that all mergers and acquisitions will inevitably fail. The merger of

Disney with Pixar, for example, combined Pixar, a company with a skill for making films loved by children and adults alike (I love the Toy Story films but sadly my wife loves Frozen), with the financial, marketing and distribution power of Disney (who incidentally just reported profits of $1.6billion for the last quarter). Equally, in the capital intensive oil industry mergers like that between Exxon and Mobil have been a great success.

But look closely and you will see that these are often the exception rather than the rule. Notably, a recent survey by KPMG showed that 83 per cent of merger deals fail to generate positive shareholder returns.

So what should shareholders look for in a merger or acquisition?

Here are three key considerations.

1. Do your due diligence properly.

Too many mergers and acquisitions are completed in a rush. Some of the rushed banking mergers during the height of the financial crisis are testament to this.

2. W hen completing due diligence do not rely on accounting numbers alone. Most mergers and acquisitions look good on paper, but it is the hidden softer factors like communication, culture and internal control issues that will determine success or failure.

3. A sk yourself why executives are promoting a merger. Do they have the best interests of shareholders at heart? Mergers and acquisitions may be driven by executive egos (which executive would not like to run a larger organisation or beat a rival by acquiring them?) and the desire to increase their bank balances – via higher pay awards.

Remember that as a shareholder you are not restricted in holding the shares of just one company – in most cases, why should you need one company to merge or acquire another when you can simply hold shares in both?

December 2015

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How should UK businesses make sure they don’t miss out on walking off into the sunset?

T

he world of M&A has been heating up over the last 12 months, with global deals making headlines.

But are private UK business owners seeing the same interest in their businesses?

In the ten months to 31 October we have seen over £2trillion of reported international M&A deals (source: Zephr) with just under 6 per cent (£126billion) involving a UK target company.

Of these transactions, 45 per cent were in London, 23 per cent were in the South and 10 per cent were in the Midlands. These transactions have varied from international acquisitions, mergers of like-minded companies, vertical integration-led acquisitions and, over the past few years, an increase in management buyouts.

SME business owners need to keep an open mind when looking at options for sale. Acquisitive companies and individuals can come in all shapes and sizes.

This year the most active sectors by volume of deals are financial services (30 per cent), technology (15 per cent) and support services (14 per cent).

We are predicting that among those sectors who will benefit from an uplift in private company M&A in 2016 and 2017 will be those who straddle multiple sectors, such as fintech and support services.

We are also seeing a significant increase in activity among diverse sectors such as logistics and technology, as businesses look to gain market share and attract clients who they may have previously struggled to service.

This uptick in activity is on the back of UK companies raising over £20.3billion in debt and equity so far this year, up an impressive 42 per cent on the same period last year. While UK acquirers have lagged behind their international counterparts in recent years, this rise in capital could lead to an increase in acquisitions by UK companies, both at home and abroad.

So how can business owners ready themselves and their businesses for a sale in 2016 and 2017?

We spoke to a number of Moore Stephens clients who recently made successful exits from their businesses, and asked them what advice they would give business owners planning on selling their businesses.

Our interviewees felt that you must understand your long-term plans before you embark on the process. Do you want to remain with the business for a while, retire entirely or set up something else in quick succession?

Emma Statham, who sold her business, MSA Market Media, to British Growth Fund-backed Four Communications Group Ltd, found that “good advisers can help you draw out the truth about your plans”.

It is also important to start thinking about the transaction as early as possible. Chris Featherstone and William Anthony led their MBO of Knight Group, a civil engineering, groundworks and property development company in 2010, and earlier this year transitioned part of the business on to the next generation management.

“Our plans had to start as soon as we became owners, although the time-frame for a sale was not fixed until the end,” said Chris.

Knowing whether an MBO is the right choice can be difficult and depends on the type of team you have within the business. Chris Featherstone knew “that an MBO was

right, as the business was going to benefit from the stability of new owners who were familiar and committed to the business.”

Some company owners worry about selling to an international competitor. However, as David Grosvenor, CEO of WeSupply Ltd, who together with his financial backers LMS Capital sold to global competitor HighJump Software Inc, found this can create opportunities. David Grosvenor has stayed with HighJump. “It is great to see our services being rolled out to customers worldwide thanks to the sale,” he said.

Many company owners are surprised by the continued emotional attachment to their businesses, even after the right purchaser has been found. Emma Statham has stayed with Four Communication. “It is like watching your children go to school,” she said. “You want to see them succeed.”

Staff are an important consideration of any sale process. David Grosvenor has also found that “a great aspect of the sale has been the opportunity it brings for career progression for the team who have been critical to our success.”

So what can business owners learn from others as they plan the sale of their businesses?

• Plan early. Make sure you have a good second-tier management team in place.

• Make sure you understand the tax impact of a sale.

A lot of planning needs to be done at least a year prior to a sale to be effective.

• Never underestimate the time it takes to plan and execute a sale.

We believe the market is good for most businesses looking to sell, but would also recommend business owners carry out a three-step spring clean of their business before they embark on a sale.

1. Ensure strong underlying financial management.

Trade within your means and undertake pretransaction due diligence to identify areas within the financial structure of your business which could be improved.

2. Tidy up your group structure. Ensuring any dormant or non-trading parts of the business are properly closed through a group simplification exercise which will make due diligence smoother, and may save time.

• Be clear about what you company stands for.

• Remain flexible and open to challenge by your fellow directors and advisers.

3. Diversify your business. Any business which is too reliant on one product, contract or customer will cause a purchaser concerns when accessing value.

• Find the right advisers for you; you will work closely with them over the transaction and you have to trust their judgement and feel they are part of your team.

Debbie Clarke (left) is head of M&A at Moore Stephens LLP +44 (0)20 7651 2340 debbie.clarke@moorestephens.com

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Inspector Dogberry

By Ciara Long, online reporter

Putting on the Ritz

our competitiveness in a quickly evolving

two companies

NEVER MIND ALL this talk about

marketplace.

brings together the

brewery and pharmaceutical mergers

combination of our

“This greater

best in innovation,

– there is another far glitzier mega deal

scale should offer a wider

that has got the Inspector’s tail wagging

choice of brands to consumers, improve

“Our guests and customers will

– the $12.2billion merger between

economics to owners and franchisees,

benefit from so many more options

Marriott International and Starwood

increase unit growth and enhance

across 30 hotel brands, while our hotel

Hotels & Resorts Worldwide, which will

long-term value to shareholders. It is the

owners and franchisees will derive value

create the world’s largest hotel company.

start of an incredible journey for our two

from our combined global platform and

companies.

efficiencies.”

Having recently stayed at Starwood’s W Hotel in New York, the Inspector has a

“We expect to benefit from the best

culture and execution.

Marriott expects to deliver at least

renewed taste for

talent from both companies as we

$200million in annual cost savings in the

the finer things in

position ourselves for the future. I know

second full year after closing through

life, and is taking a

we’ll do great things together

Mergers and Acquisitions www.themiddlemarket.com Serving M&A professionals operating in the “middle market”, Mergers and Acquisitions covers market and corporate deal-making, fundraising, target identification, negotiation, due diligence, investment banking and corporate governance through its digital news service and monthly magazine. The blog keeps a particular eye on deals involving US companies.

leveraging economies of scale in areas

keen interest in how

as The World’s Favourite

such as reservations, procurement

M&A Portal

this one plays out.

Travel Company.”

and shared services. Combined sales

www.mandaportal.com/ Content/Blog

The merger is

Sorenson will remain

expected to give

president and chief

guests greater

executive officer of

choice, combining

Marriott International

Starwood’s

following the

lifestyle brands

merger and Marriott’s

and international

headquarters will remain

footprint with Marriott’s strong

in Bethesda, Maryland.

Marriott’s board of directors

expertise and increased account coverage should drive additional customer loyalty, increasing revenue.

These enhanced efficiencies and revenue opportunities should drive improved property-level profitability as well as greater owner and franchisee preference for the combined company’s brands.

Delivering M&A news, deal commentary, features and research papers from experts across the planet, M&A Portal provides comprehensive coverage of big M&A deals taking place worldwide. Its blog is run by Lisa

Wright, managing director of M&A research body Zephus Ltd, and examines M&A news, trends, privaty equity, venture capital and IPOs.

Intelligent Mergers intelligentmergers.com Long-running blog on mergers and acquisitions is the work of Scott Moeller, a specialist in the use of business and military intelligence in M&A deals and director of the M&A Research Centre at London’s Cass Business School. Intelligent Mergers provides analyses of M&A deals including best and worst deals, global M&A appetite and UK football team acquisitions.

presence in the luxury and select-service

following the closing will

Successful Acquisitions

tiers, as well as the convention and resort

increase from 11 to 14 members

successfulacquisitions.net

segment. Combined, the companies will

with the expected addition of three

operate or franchise more than 5,500

members of the Starwood board of

hotels with 1.1 million rooms worldwide.

directors.

Arne Sorenson, president and

Adam Aron, chief executive officer

chief executive officer of Marriott

on an interim basis at Starwood

International, says: “The driving force

Hotels & Resorts Worldwide, says:

behind this transaction is growth. This

“We are excited to play a vital role in

is an opportunity to create value by

the creation of the biggest and best

combining the distribution and strengths

hotel company in the world with

of Marriott and Starwood, enhancing

tremendous upside potential. The

11

Mergermarket (Free, iOS/Android) Updated by more than 400 M&A journalists worldwide, Mergemarket sends alerts and notifications on mergers and acquisitions.

The Book of Jargon (Free, iOS/Android)

An introduction to legal and business terms often encountered in the structuring, negotiation and execution of M&A and dispositions worldwide.

Run by M&A experts, Successful Acquisitions offers frequent insight into the latest developments and trends taking place in mergers and acquisitions. Recent posts include topics such as predictions for Q1 2016, due diligence, leadership roles within deals, legal elements and the wave of mergers and acquisitions hitting the healthcare industry.

Report: M&A growth hitting a six-year high

By Joanne Frearson M&A APPETITE is at a six-year high and 59 per cent of companies are now planning to make an acquisition in the next 12 months, according to EY’s Global Capital Confidence Barometer, with 55 per cent of companies now having three or more deals under consideration.

So far in 2015 there have been more $10billionplus deals announced than in any previous year and global deal value is up 35 per cent on 2014.

About four out of five executives, 83 per cent, expect activity to increase.

Pip McCrostie, global vice chair of Transaction Advisory Services at EY, says: “With modest increases in global GDP, organic growth alone is not enough for companies to expand and reshape at the pace they need. Technology and changing consumer preferences are disrupting business

models and blurring sector boundaries. In that context, the search for growth is lifting deal-making to record highs.”

Nearly half, 48 per cent, of companies are planning cross-sector investments to seize competitive advantage as new technology impacts everything from production to services. Acquisitions into manufacturing segments were the most cited.

Second was retail and wholesale, followed by government and public services acquisitions. The sectors with the highest level of M&A intent were oil and gas (69 per cent), consumer products (67 per cent), mining and metals (67 per cent), diversified industrial products (66 per cent), and power and utilities (65 per cent).

Compared to six months ago, more respondents (40 per cent compared with 35 per cent) now plan to allocate at least 10 per cent of acquisition capital to emerging markets. However, the majority of acquisition capital will be invested in the developed

markets. There is a significant increase, 26 per Companies remain vigilant to potential cent, in the number of executives now looking to challenges, including potential economic acquire in the Eurozone. “Mature markets continue headwinds. A third, 29 per cent, of respondents to drive M&A activity,” says McCrostie. “With the view increased global and regional political majority of potential acquirers looking beyond instability as the biggest business risk. One danger their own domestic borders, there is a marked that is almost universally recognised is cyberstrengthening among executives around security around deals, with more than 90 doing deals in the Eurozone.” The US, UK, per cent of respondents viewing this as Germany, China and India are the overall a significant risk to their deal processes. top five investment destinations of McCrostie said: “The robust choice. Brazil, the US, France, Germany, confidence in the global economy may Australia and the UK look set to be the come as a surprise to some. However, prominent acquirers. many of the executives now have years Economic confidence was steadfastly of experience operating through robust, identical to six months ago, t he worst economic with 83 per cent of executives environment in decades. optimistic about the global Therefore, they are able to economy. Long-term prospects look beyond short-term for growth – albeit modest – are volatility to longer-term shaping views. growth opportunities.”

EY’s Pip McCrostie

12 · Business Reporter · December 2015

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INSIDE TRACK

M

In today’s SME market, deal-making is all about tailored solutions

T

his is proving to be a recordbreaking year for M&A – and it’s not over yet. Commentators from Bloomberg to Experian are noting 2015 has seen the most intensive period for deal-making since 2007, while Thomson Reuters reports a worldwide 2 per cent year-on-year increase in the volume of completed deals. Transactions at the very top end of the market – sale values of more than $10billion – are up 96 per cent, according to the same analyst.

That figure is startling, but the fact is there are relatively few £10billion+ deals.

The overwhelming majority of companies command enterprise values in the millions rather than billions – and this is where BCMS, as an SME market specialist adviser serving the £1-£100million M&A market – is uniquely positioned to provide a “state of the industry” perspective.

Across BCMS operations worldwide, deal volumes are up 22 per cent year-on-year – astonishing, even in a record-breaking year. As we represent clients across a wide range of sectors and territories, we are able to track a number of key trends in terms of sector activity, investor strategy and location. We estimate that in 2015, we are securing a successful deal for our

clients every three working days.

The first thing to note is that, even at SME level, cross-border activity is strong, with 31 per cent of BCMS clients acquired by overseas organisations. 2015 has seen BCMS clients securing deals with companies in the US, Germany, Canada, France and Spain. But there has also been a surge in interest from further afield.

Over the summer we negotiated our first deal to a Thai-based acquirer in the sale of premium fabric supplier Fox Linton to Jim Thompson, and our South African division delivered a landmark deal for our client with Pakistan-based Packages Ltd. Big names are buying our specialist SME clients, too: French Insurance giant AXA secured Global Insurance Management, while The Real Good Food Company Plc acquired specialist food manufacturer Rainbow Dust Colours – a business started in a storeroom in 2007.

BCMS operates across all commercial sectors, but the most intensive sectors are technology, manufacturing and healthcare.

Understandably, there is strong appetite in these three “hot sectors” – with 27 per cent of all organisations who logged their acquisition requirements with us seeking targets in these markets.

M&A management teams: survival of the clearest ore than 60 per cent of European mergers still fail to produce value. A key reason is the inability to select and retain a high-quality management team. CEOs and boards look after themselves, but it is in the one or two levels below that where value is gained or lost…

Poorly prepared companies spend too much time cutting costs and lose sight of clients – growth doesn’t happen and the value doesn’t materialise.

So what can be done? Here are four key areas where clarity needs to be the watchword:

Financial logic 2015 has been remarkable for the sheer variety of sectors showing enhanced activity. Our deal teams in the UK alone have completed transactions in sectors as diverse as forestry, pest control, water management and social care.

Interestingly, we have noticed a sharp increase in the number of “sector agnostic” acquirers – ie, organisations targeting growing companies, regardless of sector.

The major trend in 2015 in the SME space is the rise of non-trade sales, in particular private equity investments. We are now completing more growth capital deals than at any time in our 26-year history – such as the agreement between Style Research and Lyceum Capital Partners. We are also noticing significant interest from MBI teams and private investors, and a significant change in deal types. While many of our clients choose to exit their companies, we estimate 25 per cent of clients plan to stay on long-term, post-deal. Proof, if it were needed, that there is no one-size-fits-all.

In today’s SME market, deal-making is all about tailored solutions.

Jonathan Dunn (left) is managing director of the BCMS Major Transactions Group 01635 296 193 bcmscorporate.com/approach

Mergers are financial transactions. Is the focus on consolidation, expansion, or protection? This will dictate the management focus and make the required skills explicit.

Roles and who will fill them The value of a transaction depends on speed of execution. You can’t afford to have your people jostling for six months. You should design a “NewCo” where strategy dictates the roles instead of the logic of acquirer/target. Good people will leave if they think they are on the “wrong side”.

Pre-deal work is vital.

Culture Counter-intuitively, senior management are often those

with the most to lose and therefore the group most likely to resist change. Some mergers are culturally incompatible (such as that between Chrysler and Mercedes), but a new culture can be described in advance, along with desirable leadership behaviours.

This will reassure many and hasten the departure of incompatible people.

Individual psychology Mergers require high work intensity: closing the deal while delivering business as usual and motivating teams all take their toll. Irrational behaviour in periods of uncertainty is rife – this can result in sabotage and often in people not operating to their potential or putting themselves forward. Advance interviews, talent mapping and individual coaching for all key people are essential.

We have all heard horror stories of the best leaving and only “cockroaches and scorpions” surviving great turmoil. It doesn’t have to be this way. Preparing teams on both sides of a deal in advance is genuinely good for longterm value.

White Water Strategies helps align people and strategies whitewatergroup.eu/ clearest

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The key to successful M&A strategy The key to successful deal-making is choice, whatever the sector. Choice creates the best deal-making environment and the best outcomes for all. Nothing comes close to the importance of generating a competitive environment.

Our clients are typically owner-managers – many of whom have never bought or sold a company before – and they are often astonished to find that we can profile hundreds of potential

acquirers for their business. We go beyond the obvious to bring a range of acquirer types to the table, including listed acquirers, noted investors and private equity organisations. The search for a partner must be international, as M&A is global.

Today, 31 per cent of our clients sell overseas.

Partnership is key. In our marketplace acquirers and investors are looking for companies they can scale and build. Deal-making is not merely

L

arge mergers often attract close attention from competition authorities. In order for a company to get a merger approved, a detailed investigation is frequently required. Massive amounts of documents and data must be analysed to make sure consumer choice isn’t harmed and competition rules are not broken.

Neil Dryden (inset, below), executive vice president at Compass Lexecon, says: “The authorities have an appetite for probing any and all information relating to a transaction. The expectation has to be that any data-set that sheds light on how competition functions will be analysed.”

These can include structured data-sets such as customer information, transaction details and competitor monitoring, as well as untold amounts of unstructured data in emails which may have been created in the years running up to the merger.

Sometimes a company can invest many months undertaking “competition diligence” in advance of making an offer; other times a deal is conceived in a shorter timeframe as a particular situation unfolds.

But regardless, similar analysis of data-sets and documents will be required by regulators and will determine whether a merger can go ahead or not.

“If companies do not do competition diligence, the outcome of an investigation will be more unpredictable,” says Dryden. “We might not be able to advise in advance what the conclusion of the various analyses is likely to be.

It will be much harder to predict whether the merger will be cleared or prohibited,

transactional – culture and “fit” are vital. In the right deal, the benefits must be clear – not just to acquirer and seller, but to customers, staff and other stakeholders too.

David Rebbettes, left, is founding director of BCMS 01635 296 193 www.bcmscorporate.com/approach

Finding the right buyer is the key to maximising value

M

Planning a mega-merger?

Understanding competition rules is vital and what kind of divestments might be needed for it to proceed.”

The guidance from the authorities is not always clear-cut, and there is no handbook from the regulators which states what is allowed and what is not. For example, while a merger might appear to create some upward pricing pressure, that might be counteracted by new entry.

“Then the question is, how quick does the entry

have to be for the merger not to cause a concern?” Dryden says. “A lot of these issues are not very well defined. There is quite a lot of uncertainty.”

A CEO’s opinion on what makes a market competitive may not be the same as that of a regulator. He says: “The one thing buyers have to be aware of is that the authorities’ concern about competition kicks in far below the level of what most would typically describe as a monopoly. So even in an ostensibly competitive market, authorities will still be concerned about potential

post-merger price rises.”

Even when a deal does not complete, there is good news for companies that have gone through the competition diligence process. It will have enabled them to learn a lot about where they create value and what their real competitive constraints are. Although the process of analysing vast amounts of data might be arduous, it can add to firms’ understanding of how their markets truly work. +44 (0)20 3725 9007 NDryden @compasslexecon.com

aximising exit values is about finding the right buyer as much as making sure that your house is in order.

The value of an acquisition is completely different to each potential buyer. One potential acquirer might be able to instantly double profit post-acquisition through better buying power, cost savings, complementary skills and cross selling.

Another potential buyer might actually see a risk in profits reducing through potential loss of key relationships and key staff.

The former buyer is always going to be prepared to pay a higher price than the latter.

Therefore a clear understanding of a business is essential before going to market and applying this information to profiling the most likely buyer. A targeted approach using a highly researched list of buyers is always going to produce better results than a poorly researched scattergun

approach. One of the biggest risks for management in achieving best value is the disruptive effect of the sales process on the performance of the business. Therefore they do not need time wasted on inappropriate enquiries.

Planning is the key to maximising sales value – target the right buyer and tell them why they should want to buy your business.

Jeff Barber (above) is a partner at BTG Corporate Finance 0161 837 1800 www.begbiestraynorgroup.com

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14 · Business Reporter · December 2015

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The future

In focus 2015: a bumper year for M&A activity

T

When is the right time to sell your business?

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hen to sell your business is the multi-million dollar question. Well, for many UK business owners it’s a multimillion pound question, but one that will transform their lives and probably the lives of their families as well.

When do you start thinking about selling your business? Some entrepreneurs start thinking about it from the day they set it up. But for many, the business has been the life-blood of the family for years.

It has provided steady salaries and dividends, and has enabled the lifestyle where the owners control their own destiny and the opportunity to pass the business on to the next generation.

However, at some point the owner has to think about when to sell, and that’s often really tough. The business becomes so much more than just a place of work – often it can seem more like family. But at some point the decision has to be made as to what happens next.

Usually, the owner-manager can control the timing of the sale but sometimes he can’t, perhaps due to health or a change in family circumstances. Sometimes he can be approached by a buyer before he’d been planning to sell. In these circumstances, the benefit of thinking about the possible sale of the business as a matter of routine can be tremendously valuable.

Is it all about the money? For some, yes – for others, whether it is £10million or £12million doesn’t really

matter. But have you worked out what does matter? Do you understand your future financial needs? If the sale of the business marks retirement, then it probably marks the peak of your income and wealth. To decide when is the right time to sell, you need to talk to your IFA and ask him to model your expenditure in retirement.

Being prepared for an offer at any time is important. As a corporate financier myself, I know that when most clients come to me to sell, they haven’t planned years ahead, but have just made the decision and want to get on with it. They might well already have a good idea of who the right buyer is. The problem is, it might not be best time for that buyer, even if he does want to buy your business.

We recently had such a client, where the best buyer made an offer – the best offer as it turned out – but could not proceed for eight months because he had just made a big acquisition that he had to get right first.

So when is the right time?

It depends, but if you are constantly prepared and you know what valuation you need to make it worth selling, then you will be ready for the right time – either when the buyer comes to you, or when you are ready to go to them.

If you would like more information on how we can help you develop the right exit strategy for your company, contact Simon Blake on +44 (0)20 7382 7414 or email simon.blake@pricebailey.co.uk

This article is for information purposes only and no action should be taken in reliance on it without advice.

Strategic Corporate Finance activities are undertaken by Price Bailey Corporate Finance Limited, part of the Price Bailey Group, and are authorised and regulated by the Financial Conduct Authority for corporate finance business. For regulatory information see www.pricebailey.co.uk/legal

he boom in global M&A activity in 2015 is arguably way overdue. Theoretically, the markets have been set for an explosion of deals for some time.

Private equity “dry powder” (ie, uninvested available funds), strong corporate cash reserves and cheap debt markets have been in situ for at least the last three years, and finally we have seen these elements combine to drive what are already the highest announced global deal values on record – £2,800 billion as at November 17.

With roughly six weeks of the year left and a large supply of multi-billionpound deals being announced, 2015 will inevitably become the year when the M&A deal-makers can move on in their minds from the heady pre-crash days of 2007.

2015 has also been the year of the mega-deal. As of the time of writing, 34 deals each greater than £10billion and with a total value of £781billion have been announced.

This compares with a total of 18 deals of a total value of £352billion in 2007.

The major difference between 2007 and now is that back then, private equity buyers were responsible for seven of those deals and more than a third of the total deal value, compared with only three deals in 2015, representing 10 per cent of total value.

This year the mega deals have been driven by large corporates with CEOs willing to acquire their competitors in order to drive the growth of their own companies.

The year’s standout sector is telecommunications, with five deals totalling £129billion, including two big UK deals: Deutsche Telekom’s £12.5billion takeover of EE Ltd, and Hutchison Whampoa’s ongoing attempt to acquire O2 from Telefonica for £10.2billion, which is currently being scrutinised by the EU and the Competition and Markets Authority in the UK.

Global private equity activity is unlikely to surpass the record value of deals recorded in 2007 (£455billion), which was largely driven by unprecedented levels of leverage and cheap debt. However, 2015 will be the best year recorded since then, with announced deals currently standing at £334billion, an increase of a little more than 16 per cent already compared with the full year figure for 2014. “ UK companies have also ridden the 2015 global M&A wave. The value of announced deals involving UK target companies stands a little short of £318billion, the highest figure ever recorded and nearly 2.5 times the total announced deal activity in 2014.

UK companies have provided two of the top three largest deals by value globally so far this year. AnheuserBusch InBev’s £87billion acquisition of SABMiller – covered on pages eight and nine – is the largest announced deal by value globally, having knocked into third place April’s announcement that Royal Dutch Shell was acquiring BG Group for £47billion, after Charter Communications’ £50.8billion acquisition of Time Warner.

So how does this year’s level of deal activity bode for 2016? Advisers tell me their deal pipeline is good, interest rates globally are still very low, sustaining the availability of cheap debt, and there is still the unprecedented level of private equity “dry powder” around that is ready for investment. So in principle the outlook for 2016 M&A deal activity should be good. The unknown element is the impact on financial markets that increased instability around global security may unfortunately have.

Lisa Wright (inset) is managing director, M&A products, Bureau van Dijk 020 7549 5000 | bvd@bvdinfo.com www.bvdinfo.com/corporatefinance

Mergers and acquisitions activity in 2015

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Expert view How to avoid employee

derailment during mergers

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ergers and acquisitions appear to be firmly back the agenda as organisations look to quickly grow stronger, further develop their products or services and gain market share. While M&A certainly provides businesses with new opportunities, can the same be said for employees?

A critical factor in successful M&A is the ability to quickly address the people issues that inevitably arise. However, all too often it’s not front of mind for business leaders, resulting in slower progress towards the ultimate goal than might initially have been envisaged. The prospect of having their career impacted, whether through redundancy or via reassignment into a different role, looms large in the minds of many employees during times of change.

As such, the importance of communication cannot be underestimated. Helping people understand the processes and timeframes helps reassure them and provides clarity on what’s expected from them, freeing up management to focus on other tasks. It may even mean the difference between talented people leaving prematurely or staying.

Good people are important to every organisation, so ensuring they remain clear with regard to their personal career direction

is paramount. Individuals vest so much of their own sense of self in their job that any changes in this area, whether real or imaginary, can have a significant effect on a person’s psyche. Issues around status, clarity of direction, autonomy (people do not want to feel that they are not in control of their own destiny), social networks and fairness are all notable “derailers” of performance unless satisfactorily dealt with. Distilled down to a basic element, people are concerned about how much their career will be changed and how much say they will have in shaping that change.

Dealing with these issues is relatively

straightforward at organisational, managerial and individual levels. Having an overarching culture of openness and recognition of good practice with regards to people management certainly helps, but it’s at the managerial level that the real benefits start to accrue.

Meaningful conversations around a person’s career can help mitigate concerns and helps support employees during challenging times.

For the employee, the benefit is doubled – having an internal coach or mentor, well versed in the techniques of career development conversations, to both soothe concerns and also provide a point of guidance with regard to future career

development is immeasurably beneficial.

Therefore equipping line management with the knowledge and ability to have clear conversations with their teams around careers, future opportunities and the ability to deal with change will pay dividends in the long run – neglect these simple interventions and projects will slow. Key staff will become unsettled and may leave and the ultimate chances of the merger or acquisition succeeding are significantly reduced.

Owen Morgan is commercial and operations director, Penna Plc www.penna.com

Spotlight Due diligence that’s trusted by thousands

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errill Corporation’s market-leading platform for performing online due diligence is trusted and used by thousands of businesses worldwide each year for their financial transactions. Our secure virtual data room – Merrill DataSite – is designed for mergers and acquisitions, as well as other capital markets transactions, which means we are a barometer for upcoming deal activity – where it’s happening geographically and in which sectors.

In 2015 across the EMEA region, the leading sector opening projects on DataSite has been industrials, followed by technology, financial services, consumer products and then media. Somewhat surprisingly, real estate appears only sixth on the list. Healthcare, despite receiving a lot of publicity in the financial press, does not feature in the top ten.

In terms of the EMEA countries leading the way for due diligence projects, it’s no surprise that the UK is ahead of the field. More than 25 per cent of our virtual data rooms (VDRs) created for transactions in EMEA this year have been by businesses in the UK. 19 per cent have been opened in Germany, and third in our top three most active countries is France, with 10 per cent of our deals launched there. Other strong markets include the Nordic countries and the Netherlands.

There seems to be something of a

north-south divide in Europe when it comes to adoption rates of VDRs though, with a clear bias towards northern European countries that show enthusiasm for including technology in their dealmaking processes.

Not all the due diligence projects Merrill has helped kick off this year will end in an announced M&A deal. However, looking at the online deal rooms we have opened – the originating countries and which industries they represent – it looks as though the traditional powerhouses of the European economy will continue to be the UK and Germany, with a busy H1 predicted for industrials and financial services. We also expect to see technology, healthcare and media to continue in a strong vein. Equally, the energy sector is likely to see increase in activity, as the oil majors have publicly signalled a desire to restructure their portfolios.

As a gauge for future exits in 2016, Merrill Corporation’s early view from the vast number of due diligence projects we support for new transactions provides an interesting perspective on the European market, and H1 is certainly shaping up to be a busy six months.

Mike Hinchcliffe (left) is senior director, Merrill Corporation +44 (0)20 7422 6256 michael.hinchliffe@merrillcorp.com

December 2015

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Business Reporter

omads are commonly known as people that adapt to infertile regions where mobility is the most efficient strategy for using scarce resources. Nomads have a unique skill of extracting value and adapting to almost everywhere.

London is filled with modern day nomads, and I count myself among their number.

Genealogically Iranian, Burmese and Pakistani, I was raised in Ohio and lived in Washington and Texas prior to moving to London six years ago. I vividly remember sitting in the premium economy, blue fabric seat on the BA flight to London and experiencing a strange feeling. Not just that I would be leaving behind my family, friends, and Tex-Mex food. It was more the overwhelming feeling that I would miss the person I was at that exact time, and that exact place, because I would never be her again.

Since moving to London and spending half my time abroad, I learned to let go of trying to find, or define, myself and accept that I will constantly evolve with the people I meet and places I visit. The rich cultural capital amassed during these experiences has proven, and continues to prove, to be the biggest asset in my investment banking/advisory work. My clients are global family offices and mid-size institutions largely concentrated in the Gulf.

Each client thinks differently, approaches situations differently, and possesses different traits. The chances of your target market being exactly like you are extremely rare.

I have only recently started a real estate advisory firm despite working in the banking

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As a nomad, I know how important it is to build cultural bridges industry for well over a decade. The first part of my career was defined by a bull market and the second by a global financial crisis. More pertinently perhaps, the defining segment of my career can be threaded back to childhood while spending afternoons and summers with my mother at the local savings and loan branch. Although banking and investment management were segregated at that time, both were underpinned by duty and care.

As a child of first-generation immigrants to the United States, creating security was paramount to my family. Real estate played a big role in building that security and helped keep us connected to the real economy.

Education, of course, acting as the bridge that led us there.

One of the four divisions of Naissance Capital RE’s business lines is investment training and education for women in specific Gulf countries facing a gender employment gap. The courses teach practical experience,

providing the tools to develop an investment thesis, review deals and understand fee structures. Financial education is not just good governance, it is vital for financial security. Education, as a base case, should teach a common language of understanding and, in the best case, provide citizens with the tools and skills to be able to make the successful transition to employment and to contribute effectively to society.

Being a woman working in the finance sector hasn’t been the easiest journey, but my team and I look forward to continuing to build cultural bridges and create a world-class offering in the global real estate. Through partnerships, skills transfer and education, we hope to make a meaningful contribution.

Azeemeh Zaheer (left) is CEO/managing director of Naissance Capital Real Estate Ltd info@naissancecapital.co.uk www.naissancecapital.com