Mergers & Acquisitions

2018 Top 202: The Future of M&A

A growing appetite for mergers and acquisitions is built on cheap money and access to capital

CHICAGO -- Numerous indications point to continued M&A in the c-store space and other channels and sectors. Celebrity investor Warren Buffett himself describes a growing appetite for action, as low interest rates (“cheap money”) and access to capital drive high-priced acquisitions.

“In part, it’s because the CEO job self-selects for ‘can-do’ types,” Buffet said in his latest letter to shareholders. “If Wall Street analysts or board members urge that brand or CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.”

And not everyone sees the growing M&A fervor as a black hole for innovation. Bahige El-Rayes, principal with A.T. Kearney in Chicago, sees companies being successful only if they are “transformational.”

In a  study his firm did on the current state of M&A, he concluded that future deals won’t necessarily be about companies buying others similar to themselves. He sees “adjacent” acquisitions, with companies buying other companies with differing but compatible expertise, similar to Amazon buying Whole Foods, Walmart buying Parcel or Target buying Shipt.

“You have to evolve,” El-Rayes says. “You cannot think of acquisitions as just revenue. Otherwise, what have you done to change yourself?”

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