Bender Consulting Predicts Key Trends and Merger and Acquisition Activity for the High Tech Industry in 2010
AUSTIN, Texas, Jan. 7 /PRNewswire/ – Bender Consulting, a premier boutique consulting firm, today announced its predictions for key trends in merger and acquisition (M&A) related activity that will have the biggest impact on the high tech sector for 2010. Bender Consulting combines proven industry experts and world-class consulting resources to execute complex transformation initiatives for High Tech, Energy and Bio Tech clients. The talent at Bender Consulting has been involved in major mergers, acquisitions, deals and restructuring for many years. John Bender, managing director and founding partner of Bender Consulting, was a key player in the HP-Compaq merger in 2001.
“Global M&A activity in the high tech sector will be driven by a variety of factors in 2010,” said John Bender, managing director and founding partner of Bender Consulting. “While companies throughout the Asian market will continue to look to strengthen their presence in the West through acquisitions, these organizations must also contend with cultural differences that present significant challenges to achieving business success in the U.S. In the U.S., ‘green tech’ will continue to be an area of focus, and accelerate from 2009 levels.”
Key M&A Trends for the High Tech Industry in 2010:
- Chinese and Asian Companies will increase M&A activities in 2010
- China’s outbound M&A deals will continue to grow. In 2008, we saw deals valued at just over $50B — as much value as all the deals in 2005-2007 combined. In 2009, we saw $43B in activity, a 20 percent decline that would have been avoided had the proposed $19.5B alliance with Rio Tinto been approved. We expect activity to robustly increase in 2010.
- In 2010, many Chinese companies will grow inorganically through acquisitions to establish a foothold in the West and Europe, aspiring to expand internationally beyond current, local markets served.
- Chinese companies’ efforts to develop and/or acquire intellectual property (IP) will continue to increase, with significant focus on the development, distribution, and marketing of branded products for all key world-wide markets.
- M&A activities to fuel China’s growth, expected to run 8-10 percent over the next 5 years, will be in focus: oil, natural gas, iron ore, copper, coal and other raw materials will be of interest and drive activity.
- We believe China’s GDP growth of roughly 8.5 percent in 2009 will be repeated in 2010. We see the key risk to growth in 2010 to be the impact of Beijing’s ending of economic stimulus programs currently in place.
- China’s policymakers and regulators have scrambled to keep pace with a flood of inbound and outbound economic activity, creating an ever-challenging environment for cross-border investment.
- With China holding so much foreign debt, including $2.13 trillion in U.S. debt as of the end of Q2 2009, we expect encouragement from the Chinese government to reduce exposure with tangible acquisitions in 2010.
- Beyond China and the other BRIC countries, we expect Vietnam, Thailand, and Indonesia to have strong growth translating to increases in outbound M&A activity.
- Although sovereign wealth funds were hit substantially in late 2008 / 2009, the top 10 have 3 trillion in capital. We see increased hedging against the U.S. dollar, particularly in Asia. Other sovereign funds and private equity will follow.
- Integration Challenges to M&A success for Chinese/Asian companies continues
- Underlying rationale for cross-border (outbound) M&A has not changed, and in fact regulatory, governmental, and lending policies will be favorable for M&A in 2010.
- As Chinese companies look to acquire Western companies in 2010, business and cultural differences continue to be a huge challenge and barrier to achieving the business value/case predicted by the business strategists. Managing different requirements for deal structure, multiple legal and regulatory schemes, securities laws and other factors remains challenging. Increasing U.S. protectionism on products ranging from tires to steel piping add risk and uncertainty to the playing field. And inexperience of executives chartered with implementing deals greatly decreases the likelihood of success.
- Chinese companies partnering with both Asian and Western experts to help them navigate the challenges of cross-border M&A will optimize likelihood of success.
- In U.S., job creation will lag behind increased M&A activity
- In 2010, there will be tremendous job loss in the high tech sector if M&A activity continues. Every M&A deal is going to be scrutinized by the board to ensure it means growth for the company. In the short term, companies will need to figure out how to integrate acquisitions into the company, which will result in the elimination of redundant positions. In the long term, acquisitions will create jobs, but in the near term the need for synergies will dampen hiring.
- Nothing we’ve seen to date suggests that deal making announced over the past quarter will increase U.S.-centric jobs. In fact, synergy savings appear to be as important, or even more important, than ever before.
“Unfortunately, job creation will lag M&A activity in 2010,” said John Bender. “However, there is a silver lining to be seen. As integration activities and short-term reductions are completed, businesses will be positioned to take advantage of new markets, customer segments, assets and revenue streams. This will fuel job growth, and we see an uptick in the Q3/Q4 timeframe. This is obviously dependent upon the broader economic recovery in the first half of the year.”
About Bender Consulting
Bender Consulting is a specialized management consulting firm helping High Tech, Energy and Bio Tech clients efficiently complete complex business transformations involving strategy, organizations, processes and systems. Their unique business model gives clients access to experienced CxO’s, E/VPs, and directors — along with some of industry’s best consulting resources — for less cost than other firms. The company was founded in 2004 and has offices in Austin, Houston and the Bay Area. For more information, visit: www.bendercon.com
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SOURCE Bender Consulting