Adriano Agosti: After completing all the adjustments and restructurings necessitated by the financial crisis, the coming years will be marked by an increase in M&A activities among the stronger market players.
Philippe Gaydoul: M&A ushers in efficiency and boosts productivity by splitting off unprofitable portions and investing in innovative areas of business with a promising future. This creates opportunities: for change, for growth and dynamics, for diversification and employment.
Philippe Gaydoul: We limit risks by making targeted investments in segments we understand. Of course, that also opens us up to clustering risk because we’re only investing in certain segments. We mitigate those risks, however, by means of our three-pillar system of focusing on real estate, diversified asset management and direct shareholdings. From our perspective, M&As open up opportunities through the creation of a strong brand holding, through international expansion in growing markets–particularly in Asia–through synergies in brand development, through distribution and through the efficient bundling of central functions such as finance, IT and HR. What’s important to us is that we concentrate on growing markets and strong brands with a high potential for internationalization. And that a competent management team is available either internally or externally. We invest in sustainably successful business models. That means that we specifically look for companies that are in a position of leadership within their geographic or product-specific market. And we want control of the company, which means that we’re only interested in majority stakes. Of course the company must also fit into the brand-holding concept. Other key criteria for us include a critical size–at least CHF 20 million in sales–and a long-term investment horizon. The majority of the investment flows into the company, not the sellers’ pockets.
Adriano Agosti: It’s a well-known fact that over 50% of all transactions fail, meaning that there is a destruction of the companies’ value. Here it’s vital that correct assessments are made with regard to potential, the maximum purchase price and successful integration.
Adriano Agosti: The mistakes of the past, in other words overpayment, incorrect assessments and thus value destruction, will always be repeated if cash is on hand in the balance sheet. Some of them, however, will successfully implement the M&A strategy–and these are the ones we have to find.
Philippe Gaydoul: Over the past few years, M&A has resumed its development in the right direction, and has once again become that, which it was originally meant to be: A tool to promote a company’s sustained, targeted growth. Due to massive problems experienced by private equity firms during the financial crisis, a growing number of strategic buyers are once again appearing on the market. This has brought normalization in sales multipliers and returned purchase prices to a reasonable level. Profits now no longer have to be generated through financial acrobatics alone. Debt has declined strongly which signifies a return to sustainable and, above all, long-term investments. Operational improvements of corporate processes as well as long-term corporate strategies have gained significance. A company is only capable of sustainable, successful growth through investments in R&D, products, distribution and its human capital.
Philippe Gaydoul: I require efficiency, discretion and a high level of specific expertise. I look for advisors who can think at the group level and develop an eye for the big picture. Advisors who can ascertain which companies are suitable for the Gaydoul Group in both the medium and long term, which elements are still missing, where efficiency could be increased and where synergy potential can be expected.
Adriano Agosti: That they function less like the sellers of an idea but rather as advisors who work together with the company to specifically focus on the risks and overall value creation.
Adriano Agosti: Sometimes private equity firms can have a negative impact on the market (through their aggressive debt-financing style). Hedge funds in the strict sense of the term, in other words quickly-reacting leveraged funds, can have a short-term impact on the market, force M&A deals or make these more expensive. They are more likely to introduce a very short-sighted perspective which is detrimental to the market, particularly from our long-term perspective.
Philippe Gaydoul: I mainly view this group as highly-specialized investors; by making use of arbitrage opportunities, they contribute to increased efficiency on the market as a whole. More than anything, the liquidity of these financial investors stimulates the market and keeps it alive. It also offers entry and exit opportunities to strategic investors. When used correctly–and not overdone as they were within the scope of the financial crisis–hedge funds and private equity firms contribute toward growth.
Philippe Gaydoul: I foresee a geographic shift to Asia. The consequence of this will be that an increasing number of Asian companies–particularly Chinese–will be getting involved in the global M&A process. More frequently, also, as buyers of European or American corporations. Moreover, I also expect the local M&A market to be stimulated by strategists and private equity firms, which spent the majority of the past two to three years focusing on restructuring their shareholdings. I’m also quite certain that large family offices will enter the M&A market in greater numbers, and that they won’t be investing in funds anymore, rather directly in businesses.
Adriano Agosti: The volume of M&A transactions is always subject to cyclical fluctuations, yet it is also one of the key value drivers of a successful management team.
Interview: Simone Glarner, Marketing & Communications