Advisors rack up 100 million for Ahold Delhaize merger

Last month supermarkets Ahold and Delhaize announced they agreed a merger, a move which will create Ahold Delhaize, a new top 10 player in the global supermarket scene. For management consultants, advisors and lawyers the deal has sparked one of the most lucrative M&A engagements of the year, with over €100 million in fees to be distributed to among other Goldman Sachs, J.P. Morgan, Bain & Company, McKinsey & Company and Allen & Overy.

With a combined revenue of over €52 billion, Ahold and Delhaize will become the globe’s 10th largest supermarket concern, trailing for instance just Aldi and Metro Group, and US-based market leader Walmart Stores. In addition to the scale benefits, which are expected to spark €500 million in synergy savings (coupled with a one-off investment of €350 million) and build a complementary footprint across Europe and North America, the corporations expect the joining of forces to reinforce their similar strategies and positioning – geared around strong, local brands in global markets.

Ahold and Delhaize have had two previous attempts to merge, the first dating back to 2006, yet this time round the need for consolidation in a heating marketplace and the stronger “shared vision and cultural match”, as the firms put it, swayed the decision into a conclusive agreement. If the deal goes ahead – shareholders at both sides are positive yet clearance is still required from the antitrust authorities – then the new entity will operate as Ahold Delhaize, with Ahold holding 61% of the shares and the Belgians owning the remaining 39%. Ahold Delhaize’s headquarters will be based in the Netherlands.

Integration support
For external M&A advisors, the transaction has unleashed a massive flow of M&A and post-merger consulting activity. An analysis of the merger documents by Consultancy.uk unveiled by both parties shows that Ahold has picked McKinsey & Company as its lead strategy consultant and merger advisor. The US-origin consultancy advisory giant will support the Dutch management team with among other the merger strategy, setting up the organisational to-be blueprint, establishing the merger integration roadmap and overall programme management, as well as support in some functional workstreams. The decision to pick McKinsey does not come as a surprise for insiders, McKinsey has for years been the ‘in-house’ corporate strategy advisor of the supermarket concern, a partnership which stood at the basis of several transformational engagements and among others paved the way for a large interview between McKinsey and Ahold CEO Dick Boer conducted two years ago. 

At the other end of the table sits Bain & Company, hired by Delhaize to support a similar palette of activities. Both McKinsey and Bain will lead the engagement from their Amsterdam offices, with the US serving as another important hub, and complement client teams with M&A, industry and functional experts from across the globe.

For legal advice Ahold has brought in the expertise of Allen & Overy and Simpson Thacher & Bartlett, while Delhaize has chosen for the services of Cravath, Swaine & More and Linklaters. Investment banking and corporate finance support lies in the hands Goldman Sachs* and J.P. Morgan, supporting Ahold, and in the case of Delhaize support is provided by Bank of America Merrill Lynch, Deutsche Bank and Lazard.

€100 million
Together the external advisors will earn approximately €100 million in fees if the deal goes ahead and if integration and synergy realisation go according to plan, with the majority to end up in the pockets of the investment bankers.

As a result of the resurgence of mergers and acquisitions this year 2015 has to date been a feast for investment bankers and M&A consultants. According to data from Dealogic this year has seen $2,190 billion in deals announced so far, bringing the landscape in a position to improve on its 2007 record. In the year prior to the economic crisis M&A deal value totaled $4,300 billion. A recent study from EY revealed that globally 56% of large corporations are actively pursue an acquisition in the coming year. 

* Goldman Sachs also advised on the previous merger talks between Ahold and Delhaize.