Emerging Market Growth Strategies Webinar

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Emerging Market Growth Strategies WebinarThe Euro-zone debt crisis has dampened markets globally but boards continue to expect growth. 60% of companies are blaming currencies for revenue misses and reduced forecasts this quarter. Emerging markets led by Asia and Latin America represent the greatest opportunity for growth and M&A is a key strategy for leverage. In fact, 62% of Fortune 2000 companies are driving top-line growth through international expansion. While attractive, this strategy increases currency risk and operational complexity.

This emerging market growth strategies webinar video is from the Proformative webinar "Growth Strategies and Emerging Markets: Managing M&A Currency Risk" held on September 13, 2012.  The webinar features presentations from Andy Gage, Vice President, Strategic Market Development, FiREapps; Corey Edens, COO, FiREapps; Mike Gallanis, Partner, Treasury Strategies; and Joe Burke, VP and Treasurer, Avnet Corporate Services Group.

 

Emerging Market Growth Strategies Webinar

 

"We have a number of learning objectives this morning that I'll let you read through there very briefly, but at the end of this we will all be far smarter about the impact on M&A of currency issues. We will have best practices under our belt, we will have a lot of real world examples under our belt.

In order to get us started down that path, I'd like to start with a quick run through of today's agenda, and then we'll get right into our first speaker.

At the start today, we'll be looking at market drivers for M&A in the corporate sector. So where's the activity, what's driving it? Next we will move into tips and techniques for currency aware M&A, from pre-acquisition through integration and as part of your ongoing business strategy, and then we'll get to the Q&A at the end.

Leading off for us today, it's my pleasure to introduce Andy Gage. Andy is Vice President of Strategic Market Development at FIREapps. Andy has over 20 years of experience in FX exposure management, business process re-engineering, lean manufacturing, and ERP system deployments.

In his role at FIREapps, Andy advises corporations, consulting firms and business partners on a wide range of exposure management topics and industry best practices.
Andy has previously held senior management roles at [DeLloyd] Consulting and Syntex Pharmaceuticals, and is a frequent speaker at treasury and finance conferences.

And with that, Andy, please take it away.

Andy Gage: Thanks. I appreciate the introduction, John, and welcome everybody to the session. This is a session I personally have been looking forward to for quite a while because it is something that we run into fairly regularly with our clients as companies are dealing with the appetite for growth. We've certainly seen a lot of interesting challenges that come out of the M&A process related to currency risk. So I hope you find today's session very informative.

To set the stage for that, I don't think we need to spend a whole lot of time on just taking a step back and looking at the impact that currencies are having across the board. We've seen a noticeable uptick, and this really started back with the financial crisis in 2009. Some very significant currency volatility, very strong directional movements and last quarter I think was particularly challenging for a lot of corporations.

We actually did a study of the earnings calls of about 650 corporations for the past several quarters and we detected with the dollar going from about $1.35 to $1.25, there was a 50% increase in analysts questions about the impact of currencies on financial results. So it's certainly a focal point for corporations right now. Given what's  happening in Europe and in other parts in the world, it's going to remain so.

Given that, we also, as a course of operations, we monitor what CEOs are talking about, in terms of the directions that they're taking their companies. We've seen a significant uptick, really starting back in 2010, with companies really trying to get back on top of the business opportunity and start to drive top end growth as they climbed out of the recession. As you can make a direct correlation, there's been a strong appetite to build those businesses into emerging markets.

One of the challenges that we see represented by that, as we've been working with our client base is that the way in which companies are moving into these markets oftentimes is through bolt-on or tuck-in acquisitions where they're building out their ability to access markets in Latin America, in the BRIC countries, in Asia-Pac, and they're gaining access to those markets through very quick acquisitions. But that does add a tremendous amount of complexity to the challenges that currency risk managers have to deal with inside of corporations.

When you then take a step back and think about that in the light of the Euro threat, obviously there's been a tremendous amount of news this week with the German courts basically upholding the rescue package. There's been now the impact of quantitative easing here in the U.S, adding to that volatility. But I don't think anybody at this point feels that we're out of the woods yet. There's still a number of issues that need to be dealt with systematically within the Euro zone and there is an increased call, and preparation quite frankly, for Greece to separate from the Euro.

Now, whether or not you subscribe to that belief is actually somewhat secondary if you're a currency risk manager. I think the main thing that we expect to come out of this is a significant increase in volatility. I think anybody on the panel today would bear witness to that. We see a lot of companies working very hard right now to prepare as they go into the next year thinking about the potential scenarios and there's a lot more questions being placed on treasury and the group coming in from boards, from CEOs, from CFOs around what is our exposure and how is the Euro potentially going to impact my P&L and my cash flows and my earnings per share. In many cases, just due to the way the company's approached talking about that question historically, they're not very well equipped to deal with that. So there's been a real urgency to begin
thinking about that in more substantive and quantitative terms.

But that's really kind of the back drop that we see from what's driving a lot of that activity is that appetite for growth. There's a lot of acquisitions that are happening out there. There may not be the large grain acquisitions like you saw a few years ago with the Mercks buying, and Pfizer buying Wyatt. But there's a lot of incremental acquisitions that are going on right now to fund or drive that international growth. I think as you get to see how the business has continued to expand, they're very much along those lines, as well. So with that, what we'd like to do now is step into a quick polling question. John, if you want to take that over?

John: Yeah. Let me grab that. I'm going to go ahead and launch our first polling question tight now. We're going to give folks about a minute here to work their way through that. And once again, even if you're not here for [CPE] credit, we would certainly want you to take this poll. We'll take a look at how everyone answers when we get to the end of today's events.

I'll also remind you that you can ask questions at any time. Please feel free to do so via the control panel, and the question portion of your GoToWebinar control panel. We'll leave this out for another ten seconds or so and then we will hand over to our next speaker.

At this point, I'm going to go ahead and close down that poll and introduce you to our next speaker. Corey Edens who is the Chief Operating Officer of FIREapps. Corey is the Chief Solutions Officer and co-founder of FIREapps.In this role, he oversees the company's product and solution strategy, and assists clients in designing and implementing holistic currency risk management programs.

Prior to beginning this role in 2000, Corey served in numerous executive finance and accounting roles, including his role as President of Valcon Distributing Limited and Controller and Director of Operations for the Microsoft network. Corey holds a B.S. degree with high honors in accounting from the University of Montana.He's a trustee of the University of Montana Foundation and a board member of ACI America, The financial markets Association. He has been published in the Journal of Corporate Treasury Management and is a frequent speaker at university and industry events.

And with that, Corey, please take us away.

Corey Edens: Thanks, John. The area that I'd like to speak about is premier [inaudible 00:08:39] readiness and some key to success and things that I've seen in working with companies over the last ten years.

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A key point to start with is ensure the treasury is the table with their FX lens. And, as you're sitting there, you're thinking about the impact from pre-close planning through the process of moving towards the close and then post-close. And being able to visualize what that could potentially look like. Driving an awareness as to what is happening. And the goal at the end of the day is to eliminate FX surprises.

So some of the key areas as you begin to think and work your way through that with that lens is being able to think about total exposures and the risk associated those exposures. You have that risk and those exposures today in your world prior to the acquisition or merger and now you'll be accumulating or incorporating potentially additional exposures in some of the same currency pairs, and sometimes another currency pairs, in other areas of the world that you haven't done business in before.

Along with that, and thinking that through is then it's then FX management framework that you have in place to manage your exposures today and what does that need to look like going forward? Is it robust enough? Do they need to be . . ."

End partial: Emerging Market Growth Strategies Webinar

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