| In this special issue of the Manufacturing Barometer, PricewaterhouseCoopers asked our
panel of industrial manufacturers what factors contribute to
a successful deal and what their plans are for M&A
(mergers and acquisitions) through 2007. For M&A, senior
executives say their ability to address people issues and
the integration work after the deal are the two most
important factors for success. Eighty-four percent of
respondents ranked people issues as extremely or very
important, while integration was seen as a top priority by
80 percent of those surveyed. This implies that companies
view post-merger organizational, employment and
communication issues as a priority to be addressed
throughout the transition.
Pre-merger activities are also an important challenge.
Seventy-four percent of respondents ranked financial due
diligence as the third most important factor, followed
closely by getting sound strategic advice during the M&A
screening process (72 percent).
In a marked change from previous surveys, senior
executives ranked Sarbanes-Oxley compliance at newly
acquired entities as a lower concern. Sixty-six percent of
respondents listed it as only somewhat important or not
important, while 21 percent ranked it as extremely or very
important. The results indicate companies are more
comfortable with the regulation and less concerned about
entity-level controls.
Other areas considered less important are the structuring
of working capital adjustments and preparing for a
divestiture, as noted by 44 percent of respondents.
Addressing accounting and SEC issues that arise during a
transaction was cited by 38 percent. Depending on how
the current credit market story unfolds, and as most of the
country begins to prepare for seasonal energy needs,
managing working capital adjustments may rise closer to
the top of the priority list in the months to come and
change the picture we see in the data today.
Fifty-six percent of manufacturers reported involvement in
M&A activity and related transactions during 2006 (e.g.,
joint ventures, alliances). Although the credit market is
different today than it was at the time of the interviews, 64
percent expected to participate in similar or related activity
by the end of 2007.
Responses also showed a growing interest in foreign
markets. Twenty-six percent of respondents reported
plans for M&A in Asia and 13 percent in Latin America —
both sizeable jumps from 2006. Plans for deals in Europe
show little change from 2006, with only a 2 point increase
to 15 percent.
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Contacts
Barry Misthal
US Industrial Manufacturing Leader
Tel: +1 267 330 2146
Jim Clayman
Sector Analyst
Tel: +1 636 405 1672
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