Q&A with 15 top Global M&A Dealmakers
Lucien Ong, Group Director of M&A and corporate development at Jebsen & Jessen Group, discusses dealmaking post-Covid and prioritising sustainability in M&A due diligence
Global M&A activity in 2023 has largely followed the downward trend that emerged in 2022, albeit with pockets of resilience and even signs of a nascent recovery in a small handful of markets and sectors. When might we expect to see a turnaround in M&A activity?
Within the Southeast Asian deal market, we are observing an equal number and quality of deal opportunities today compared to those seen 12 months ago. However, the deal environment has become less competitive, with fewer active buyers, which leads to less competitive tension in auction processes. This is attractive to us, and allows us to negotiate more favorable deal terms and structures. We also observe that deals are being made between strategic buyers with clear synergies, whether it is a cost synergy or cross-selling across markets, alongside sellers who have reasonable expectations. I think this trend of strategic buyers leading the way will continue for the foreseeable future, until the market recovers.
What do you think will be the biggest potential risks or challenges that dealmakers will have to contend with in 2024?
The challenges we are seeing are a direct result of operating in a post-Covid environment, with the pandemic significantly impacting this region. A year post-Covid, assessing the sustainable, long-term performance of a target remains difficult. Even if we look at the financials of target companies from the last three to five years, certainty is lacking. For this reason, I believe 2023 will become an important year for companies, as they will have the opportunity to present their sustainable performance going forward.
Are dealmakers dedicating more resources to due diligence to make sure potential deals get off on the right foot?
At Jebsen & Jessen Group, we have always dedicated focused resources to due diligence because of the substantial long-term investment decisions we make. When seeking opportunities in new geographies and industries, we dedicate even greater resources. When assessing an opportunity in a new geography, for instance, it is essential that our due diligence partner has a local office in the area or, at the very least, has a track record of local projects in the geography.
What facets of due diligence, if any, are dealmakers increasingly prioritizing or emphasizing in transactions? Apart from the standard financial, tax, legal and HR aspects, sustainability/ESG is the next big category in due diligence.
Jebsen & Jessen has historically been deeply committed to issues regarding sustainability. In 2011, we believe we were the first industrial company in Southeast Asia to achieve carbon neutrality. We are relieved to see a growing awareness in the public domain surrounding sustainability and are happy to see the shift in broader markets.
Typically, when we look at deals, we commission independent sustainability assessments. First, we assess the sustainability of the industry and, second, the sustainability of the target itself. If the target does not meet our sustainability thresholds, we do not proceed to the next step in the M&A process. We have a strong sustainability filter for deals.
Are you seeing ESG as the number-one driving factor for deals? And if so, is this mainly a concern for certain sectors such as the energy sector or is it a trend that you’re seeing across sectors?
Jebsen & Jessen Group is a diversified industrial group, and sustainability is at the heart of every investment we make. For this reason, we are a case in point that sustainability concerns span across sectors, as they should. As part of a 130-year-old family enterprise, it is important for us to invest in businesses that we believe will be sustainable over the long term.
Once a business passes through due diligence and the investment committee is comfortable to proceed, we make the acquisition. Following the acquisition, we review the sustainability practices within the target and implement various ESG or sustainability best practices and standards, as our objective is to be the most responsible player in the industry. On the topic of sustainability, Jebsen & Jessen Group recently launched our inaugural group-wide Sustainability Report based on a framework designed by the Family Business Network (FBN) and the United Nations Conference on Trade and Development (UNCTAD), which is available on our website.
Although we are a private enterprise, we believe as a group it is important to be publicly accountable and we encourage other companies to follow suit.
~ Originally published by Ansarada