To Buy Corporate Innovation, Innovate Deal-Making

Jan 22, 2016, 08:31 ET from Deloitte

NEW YORK, Jan. 22, 2016 /PRNewswire/ -- More than half of respondents (57 percent) to a Deloitte survey titled "Corporate development strategy:  Thriving in your business ecosystem" expect the number of innovative deals at their companies to increase during the next two years. Yet, only 20 percent say their corporate development groups are well prepared to manage the expected increase in innovative deals.

"An increasing number of corporate leaders expect to buy innovation in 2016 and 2017 through M&A or partnerships, but may need a properly skilled corporate development team with new creative and flexible models to help originate those deals," said Russell Thomson, managing partner of Deloitte's US merger and acquisitions services practice. "You will need to be known as a company with which people want to get into business. The days of corporate development teams waiting for bankers to bring them these deals seems to be ending. If you want to lead in accessing new, innovative companies, consider making your own inroads so you don't miss the next big thing."

To develop a robust sourcing pipeline, some 59 percent of respondents are investing in being perceived as a preferred acquirer by creating ecosystems of partners—not targets—to draw leading-edge firms toward their companies. Survey results confirmed the increased focus on growing reputation rather than growing corporate development staff, as only 20 percent of respondents say their companies expect to dedicate more employees to sourcing deals in the next two years.

"Beyond acquiring innovation, leading corporate development teams are innovating deal-making itself by challenging some sacrosanct concepts," said Chris Ruggeri, Deloitte Advisory principal, Deloitte Transactions and Business Analytics LLP. "Think of your organization as a dynamic platform of valuable assets--not as that decades-old org chart on your wall. Look beyond linear competitive models and traditional industry definitions for potential partners that build on your platform. Improve communication with investors by leveraging investor relations better to communicate from deal strategy to origination on through to integration. Consider shaking up your business ecosystem if you want to become a more innovative and innovation-attracting dealmaker."

Additional Survey Findings:

  • Keep improving shareholder engagement: Sixty percent of survey respondents say shareholder activism has some impact on deal activity in their industries, often stimulating the deal pipeline (27 percent), putting upward pressure on deal prices (23 percent), and increasing competition for deals (20 percent). Yet, respondents' companies haven't changed how they plan or execute deals as a result of increased shareholder activism (86 percent).
  • Involve investor relations (IR) earlier and more strategically: Despite the value they can offer in engaging investors and sharing market intelligence, only 20 percent say that IR is very involved in deal deliberations and even fewer (10 percent) involve IR before a target is approached. Nearly half (49 percent) consider IR's primary role to be managing investor and analyst relationships and questions, yet just 17 percent say it's important for IR to critically evaluate deal strategy from the investors' perspective.
  • Rethink how employees engage with market participants to originate deals: While 47 percent of respondents expect employees to be the source of their companies' most successful deals in the next two years, few employees can afford to devote enough time to origination and the ongoing development of relationships with potential sellers. Just 38 percent of survey respondents said deals currently come directly through employees.

About the Survey

Deloitte's survey titled, "Corporate development strategy:  Thriving in your business ecosystem," looks at trends in M&A and assesses companies' effectiveness in managing strategic transactions. The online survey was completed August 27October 9, 2015 by 357 professionals involved in M&A around the world. These professionals were located in the U.S. (73 percent), Europe (13 percent), Canada (7 percent), Asia/Pacific (4 percent), and Latin America (3 percent). Respondents included heads of corporate development/M&A (31 percent), corporate development/M&A executives or staff (14 percent), CEOs/presidents (9 percent), and CFOs (11 percent). The remaining respondents were board directors and executives in HR, legal, strategy and other functions involved in M&A.

Respondents represented both public (53 percent) and privately held (47 percent) organizations. Companies surveyed broke down in terms of annual revenue as follows: 17 percent had revenues of more than $10 billion, 10 percent had revenues of $10 billion to $5 billion, 23 percent took in between $5 billion and $1 billion, 50 percent had revenues less than $1 billion. For the purposes of the survey, "corporate development" refers to a broad range of activities that support and enable M&A-related growth.

As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries.  "Deloitte Advisory" means Deloitte & Touche LLP, which provides audit and enterprise risk services; Deloitte Financial Advisory Services LLP, which provides forensic, dispute, and other consulting services; and its affiliate, Deloitte Transactions and Business Analytics LLP, which provides a wide range of advisory and analytics services.  Deloitte Transactions and Business Analytics LLP is not a certified public accounting firm. These entities are separate subsidiaries of Deloitte LLP.  Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Contact

Shelley Pfaendler
Public Relations
Deloitte 
+1 212 492 4484
spfaendler@deloitte.com

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SOURCE Deloitte



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