Krull Corp.

November 12, 2009 12:00 ET

The Evolving Nature of Corporate Mergers and Acquisitions in the Wake of the Global Economic Crisis

WASHINGTON, DISTRICT OF COLUMBIA--(Marketwire - Nov. 12, 2009) - In an article in Global Finance Magazine Dr. Alexander Mirtchev, economics expert and president of Washington-based Krull Corp., a consultancy with a focus on new economic trends and emerging policy challenges expounds on the signs of revitalization in the international mergers and acquisitions market. He assesses the implications of the resurgence of investment activity and the potential repercussions of the growing trend of investors' "clubbing together" for major acquisition and investment deals. 

After the international M&A activities "cratered" in the midst of a global recession, there are finally indications that corporate tie-ups and "teaming-ups" are once again becoming an attractive form of prioritizing investment activity. According to Alexander Mirtchev, "looking towards recovery, joining forces allows investors to achieve better terms and access 'tailor-made' financing tools. This has led to intensifying interest in mergers and acquisitions of a size that until recently appeared unviable due to the impact of the global economic crisis." Despite the fact that global economic recovery is "moderately-paced and uneven," he added, "M&A activity has picked up noticeably, perhaps even beyond the level that is perceived to correspond to the actual state of the global economy."

The rationale for the recent resurgence can be seen not only in efforts to tackle the effects of the crisis, but represent also the "long view" of recovery in the post-crisis period. From Mirtchev's perspective, mergers and acquisitions are not simply driven by the growing perception that asset prices have dropped to a level that makes them attractive. "Rather, a number of major corporate alliances and acquisitions reflect the drive to develop synergies beyond the immediate," he indicates. "Merger and acquisition activity is being driven not just by the growing perception of attractive asset values in the wake of the crisis. Stronger investment interest is also due to the momentum of private equity firms, investment companies and sovereign wealth funds "teaming up" in order to achieve shortcuts to improved market knowledge, better trading terms and increased opportunities for investment with a realistic medium to long-term significance." 

According to Mirtchev, "there is, in addition, a view among major investors that combining forces brings new resources to bear to a particular project, as well as enhancing the level of expertise brought to the table. The primary advantage of forming clubs is to spread the risk while increasing potential profits. Meanwhile, the co-financing is welcome at a time when lack of financing is the biggest impediment to dealmaking." Skeptics would suggest that, given uncertain demand, M&A recovery reflects the desire by CEOs to use cash to eliminate their weakened competitors rather that invest in organic growth and innovation. From Mirtchev's vantage point, this is a sign of maturity by investment companies and funds, which are now interested not only in short-term gains or in "glamour investments", but are more focused on the results in the long-run. 

Moreover, a number of investors are showing greater willingness to join forces, in order to pool their exposure to risk, generate additional opportunities and multiply the effect of their resources. "The increased willingness of investors to share the benefits from an acquisition in order to introduce elements of comparatively independent supplementary financing mechanisms in their transactions is another sign of their growing acumen," posits Dr. Mirtchev. "These signs of maturity reinforce the legitimacy of mergers and acquisitions, and provide an added level of liquidity to a system that is still struggling to cope with the effects of the global financial and economic crisis."

About Krull Corporation

Washington, D.C.-based Krull Corp. was founded in 1992 with a mission to address new economic trends, relevant business strategies, and economic and political risk mitigation.

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