Credit Crunch Takes Toll on M&A Activity
Google, Microsoft, Oracle – all big names, all big players. But how did they get to where they are? And is their path still the one to follow if you seek business success? Some might say yes – the current global credit crunch could be seen as merely a blip on the overall landscape – and companies that wish to grow and expand can still look to aggressive M&A activities (as these companies have done) as the sure-fire way to achieve a higher level of growth. Others might be less confident.
The business world is now a different place due to the global credit crunch. Money is too hard to come by, and the risk levels associated with acquisitions are now based on a much higher threshold. Traditional M&A activity is simply less likely to happen unless there is a no-brainer business case.
Those acquisitions that do happen will have to be more collaborative with comprehensive mechanisms to mitigate risk. Mergers may become less defensive and more focussed on achieving economies of scale and improving market share.
All of this will mean an increased focus on organic business growth. For the CEO who has spent the bulk of their business life utilising M&As as mechanism of expansion this could come as a shock, and they will now have to start focusing on how to encourage organic growth, including wiser implementation of procurement strategy, to reach their business goals.
For procurement professionals these new business trends will, in all likelihood, mean having to show greater flexibility in the contracts that are put together with suppliers and an improved understanding of the financial health of the companies with which you choose to do business.
- Source: European Leaders Network, Thursday November 8 2007
- Author: Malcolm Swallow