Discussions on potential mergers or business transactions are increasingly making their way into corporate corridors. So what is spurring the concept? We believe it is a variety of factors.

In the first instance, there are the dynamics of an ever more competitive market, where margins are placed under pressure, often coupled with little room for local market growth. Within this setting, M&As could deliver the much-required economies of scale, leading players to merge with others, including one’s once arch-rivals.

There is also a greater awareness of M&As as a plausible tool for strategy implementation, enabling one to acquire market presence, a customer book, knowledge and skills, an assembled workforce and/or supplier arrangements (including brands), among others – cutting learning curves and shortening lead times.

It is never too early to take steps towards grooming a business for sale

Larger corporate groups which have built up cash reserves are also eager to sustain and enhance their returns via investing in growth areas. This is creating a new pool of potential bidders with an appetite for multiple transactions. Another factor includes succession-motivated transactions in family-owned businesses, as well as a new generation of entrepreneurs who build to sell rather than build to hold.

Within this setting, there are a number of take-aways as we move into 2014. Firstly, it is an acknowledgement that potential first-mover advantages in this area only emphasise the import-ance of acting swiftly. Then there are some pertinent questions for boards to consider, including, “Has the business leadership invested commensurate time to consider what M&A could offer or at least where M&A could be worth exploring?” and “If there were an approach by an unsolicited bidder tomorrow would shareholders be able to extract the value they believe the business is worth?”

Experience shows that it is never too early to take steps towards grooming a business for sale. Indeed, one powerful enabler to drive value is for business owners/drivers to adopt a mindset which contemplates the sale of the business as a possible reality (as against holding on to infinity).

This can help sharpen the decision-making in favour of true business value creation which could be realised through a transaction.

We expect 2014 will be a year of deal-making, both in closing transactions as well as in seeding new opportunities.

CEOs and business owners are well encouraged to follow this space and the value-added it could offer.

davidpace@kpmg.com.mt

David Pace is the director for advisory services at KPMG Malta.