Cyrille Perard is the Co-Head of M&A for France, Belgium and Luxembourg (Frabelux), and has been associated with Goldman Sachs for 15 years. He feels that, while the Brexit has introduced short-term volatility, it does not affect the M&A plans of corporates that are part of their mid-long term growth strategies.
Leaders League. What are your expectations for M&A in Europe over the next 12 months?
Cyrille Perard. I believe that all the signals for a strong M&A activity are there. Factors such as the availability of financing, affordable cost of financing, need to fuel growth at times when GDP growth is low, and CEO confidence – the most important factor that is more difficult to track – are all present, and have been there for the last 24 months at least, which has allowed sustained M&A activity globally.
What has changed recently is the Brexit. It has introduced short-term volatility. This creates difficulty for pricing deals, and corporates are not in the business of making bets in volatile market conditions. Hence, the immediate reaction can be a “wait and see” attitude. However, long-term strategic M&A plans are not very likely to be affected, and we remain very confident about the M&A activity within the region.
I am personally convinced that our clients – the corporates and the funds – can price a lot of things. However, what they cannot and do not want to price is uncertainty and volatility. The times when there is less M&A activity are times when people cannot tell whether a certain asset is worth $80 or $100 million, and they don’t want to take a bet, because it’s not what they do for a living. So they prefer to wait, and the activity gets delayed.
Leaders League. Are there any particular sectors / geographies expected to witness strong activity?
C.P. Judging from deals that got announced in H1 of 2016 particularly in France – the merger of Technip and FMC Technologies (energy), Casino Guichard Perrachon’s sale of Big C Supercenter (retail), Sanofi’s bid to acquire Medivation (healthcare), Gecina’s bid to purchase Foncière de Paris (real estate), as well as a few private equity and large public deals – activity remains strong across all sectors.
FIG is probably the one sector where M&A activity is behind, and may remain subdued mainly because of uncertainties associated with the regulatory framework – solvency 2 is still being implemented and capital allocation rules for banks are being reviewed.
In terms of geographies, M&A used to be a big US show with the UK following. Continental Europe was less active – although there were a few big deals over the last 24 months. This year, on the contrary, we have seen a very active market in very different type of deals – inbound, outbound, big cross-border, as well as both buy and sell side private equity. There is some form of a catch up, I think, from continental Europe that had not happened for various reasons.
Leaders League. What is Goldman Sachs’ secret behind being successful at winning the highest quality deals?
C.P. None of it is really a secret. We put our clients first, try to serve them as the best we can, and provide them with advice that goes beyond just M&A advice – how to get a deal done from A to Z, what will be the shareholders’ reaction, how to finance the deal – all of this within the M&A umbrella. We try to come up with a package solution to help our clients from day one until the end.
A key attribute that sets Goldman Sachs apart is the consistency of the teams. We give our clients the best person to advise them regardless of the deal location. Today, most of the deals we are looking at, and those that we want to play a part in, are cross-border – there are less and less intra-market consolidations. The key to success in this case is that you not only have a strong team in the UK or Japan, but also have a strong team everywhere else.
Furthermore, teamwork is at the core of what we do. When a client hires Goldman Sachs, they don’t hire just one person. We deliver the best together with all the teams worldwide, to get to the goal that the client wants to achieve.
Another differentiating factor, especially versus some boutiques, is if we feel that a certain deal is not in the best interest of our client at a certain point in time and under a certain set of conditions, we advise the client to walk away from it – and not walk away only tactically, we tell them than this one is really not for you at these conditions. We have done this in the past, and are not scared to do it again.
Leaders League. Goldman Sachs is a huge bank catering to various sectors and thus has experts in many fields. As such, do you try to bring on board sector experts to certain deals where there is a large real estate or FX component, for example?
C.P. If we believe there is a need to bring more people internally from different areas, we do that. If we have a certain sector specialist who we think adds value, we bring him or her in.
We always make sure that we can bring the right people in front of the client to give the right advice, regardless of the type of opportunity for us. Once we have a client, we will do whatever it takes to go as far as the client wants. However, we are only advisers, clients are the ones who ultimately decide as they are taking the risk. Our job is to put our clients in the best position to make the best decision.
Leaders League. Could you tell us a little about the European deals that you are working on, and what impact does the departure of the UK from the EU have on those deals?
C.P. To date, we have not seen any client asking to postpone a transaction. We have not seen any client cancelling their M&A plans. We have actually announced M&A and financing deals. We were advisers on the Danone / Whitewave transaction. It was announced post-Brexit and was negotiated throughout the following weeks, and Brexit had no impact on it. We also have a few deals going on, some of which are likely to get announced in the next few weeks and some of them after the summer. Brexit has had no short-term impact. So, on a net basis, Brexit is of course a negative as it did introduce short-term volatility, but it’s not a major deal breaker from our perspective.
Leaders League. What were the factors driving the success of the major European deals that you closed over the last 12 months?
C.P. It is not easy to get to a list of factors that drive success on deals that got closed. It is very different from one deal to the next. A deal is obviously about price and governance, but those are deal conditions, and not really factors driving success.
Sometimes you look at a deal where there is a buyer and a seller, who want to transact with each other. It seems very straightforward. But when you are in that position and you are trying to put away all the tactical implication, a lot of complications that can arise, and this is where we add value. We try to foresee and minimize the impact of external forces. We try to make sure that we know and we help clients better anticipate what is going to be the shareholder’s reaction when it’s a public deal.
When you are talking about a public entity buying a public or private entity, the shareholders are usually not informed ahead of time. They discover the news only when it is announced. If your share price is dropping on the day of the announcement, you know that your shareholders are not liking the deal, because they don’t like the impact that this transaction would have on their company.
We also help clients secure financing ahead of time on a confidential basis, whether it’s a public or a private deal. So we tell our clients here is the documentation for bridge financing, you can refinance, you can bring in someone else, etc. it’s done and you don’t need to worry about that.
Affan Bin Mahmood