Survey Reveals 58 Percent of IndustryExecutives to Pursue Acquisition or Merger in ’99
With heavy competition from a variety offronts – including the Internet, direct mail, start-ups, new alliances and internationalentities – large retail organizations are looking to identify more competitive ways toachieve operational cost efficiencies, while quickly and dramatically expanding marketshare and their customer bases, according to a new study of 100 senior-level U.S. retailexecutives by consulting firm KPMG LLP.
In this regard, the 1999 strategy of choicefor most retailers (86 percent), says the report, is to pursue mergers and acquisitions.In fact, 58 percent of the executives surveyed expect to complete a merger or acquisitionthis year, while 38 percent are considering such activity “very likely.” Thislikelihood increased to 68 percent when the executives were asked about their plans overthe next three to five years.
When pursuing these ventures, said therespondents, they will consider financial structure, company fit and tax structure as thekey factors in determining whether a particular merger or acquisition would be a goodbusiness maneuver.
Moreover, said Carolyn Fikke, managingdirector of KPMG’s Corporate Finance practice for retail: “If the industryaggressively moves ahead [with this trend] we should expect a greater focus onpost-integration activities.” She also noted that companies must concentrate on acohesive transaction plan – from initial discussions to valuation to financing andstructuring the deal to post-merger integration. Confirming her belief, many of theexecutives indicated that integration is the weakest element of a merger or acquisition.
Another analysis in the KPMG studyconcluded that psychological factors play an important role in driving executives topursue merger and acquisition activities. These factors include: 1) the relentlesspressure to deliver valuable, short-term growth; 2) the fear of “missing thetrend,” thus falling behind competitors; and 3) the need to portray themselves asconfident, vigorous leaders.
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The study also identified the top fourhighest-ranked business challenges in the retail industry. Forty-nine percent of theexecutives reported marketing competitiveness, including pricing and product improvements,as the No. 1 challenge. Following at 29 percent were revenue and growth issues, includingsales and margin improvement. Competition for qualified employees and technologicalinnovation completed the top four at 24 percent and 22 percent, respectively.
For more information about the study,contact KPMG at tel.: 201 505 8851.