'Value creation in deals hard to find'

Muscat: A PwC and Mergermarket study of 600 global senior corporate executives has found that only 61 per cent of buyers believe their last acquisition created value.
However, acquirers that prioritise value creation from the onset of the deal outperform their industry benchmark by 14 per cent on average, 24 months after completion, while divestors that prioritise value creation can outperform industry peers by six per cent for the same period.
The creating value beyond the deal report explores how corporations – both on the buyer and seller side — approach value creation throughout a deal. Using industry data, interviews with senior corporate executives, and academic support from the Cass Business School, the research team analysed eight years of transaction data to determine what made them so successful.
Although value creation strategies are becoming vital to long-term success, the study shows that 53% of acquirers are underperforming their industry peers, on average, over the 24 months following the completion of their last deal based on total shareholder return (TSR).
Similarly, 57 per cent of divestors are underperforming their industry peers, on average, over the 24 months following the completion of their last deal based on TSR.
In this regard, private businesses and family groups are rethinking how they can manage their portfolio of assets to maximise value over the longer term by improving transparency and intervening to drive better performance.
Karl Mackenzie, Value Creation in Deals Leader at PwC Middle East, said: “Value cannot be created unless you have the right talent in place to create the transformation required. When performing transactions, clients are finding it hard to retain key executives. In addition, understanding and respecting the culture of the target is important to ensure talent is retained and value is not lost post acquisition.”
Mackenzie added: “Our clients in the Middle East are also finding their existing assets (across most sectors) are under pressure, causing values to decline. This has resulted in clients rethinking their current asset strategies leading to the restructuring and sale of non core asset sales.”