Strategies for Successful
Mergers & Acquisitions
How to enhance success and avoid pitfalls with mergers and acquistions.
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Each year U.S. companies spend more than $2 trillion on M&A transactions and the failure rate of these transactions has been estimated at 50%-80%, based on numerous studies.
The primary reasons for the abysmal success rate of M&A transactions are: failure to match acquisition candidates with the M&A strategy and inability to clearly understand where the transaction value resides and the optimal way to harvest it.
Most of the published analysis for improving the success rate is focused on the strategic buyer’s perspective, defined as a public or private company that buys another company usually in the same business or consumer segment. However, equally significant in the M&A marketplace are financial buyers such as investment banks, private equity funds or private equity investors who acquire and integrate businesses.
Each acquisition candidate brings with it a unique set of challenges and opportunities. Acquisition success, or at least improving the chances of successful value creation, begins with a clear understanding of your acquisition strategy and the critical success drivers to be evaluated during due diligence and mastered during implementation
360-degree View of Acquisition Targets
Conduct an objective due diligence for a 360-degree view of acquisition targets
Far too many acquirers fail to adequately consider the target’s business model – namely, its’ customer value proposition, profit formula, resource strengths and weaknesses (people, technology and assets) and critical business processes. Unfortunately, during the due diligence phase, buyers often don’t have the time or focus to get these issues resolved, yet the answers to these questions form the basis for the integration strategy and timeline.
During the due diligence phase of an acquisition the buyer typically has a short period of time to gather and analyze the required information either because there is a bidding process with clear time windows or because of the extent of disruption the seller must go through to make the information available to the company. Additionally, while data rooms are often assembled and/or information is made available to the prospective bidders, there is a heavy bias of financial data over customer, business process, human capital and strategic information. This puts tremendous stress and importance on the need for rigorous, holistic due diligence done by experienced operators who know what questions to ask and what information to review.
We operate as an advisor across all the strategic and operational disciplines, thereby providing a full 360-degree view of the acquisition target. Our consultants provide candid feedback and advice to our clients to guide smart acquisition decisions.
Guide a successful post-acquisition integration
Many buyers treat due diligence and post-acquisition integration as discrete tasks rather than continuous and dependent efforts performed by the same core team to leverage knowledge, ensure continuity and facilitate speed.
Speed and time to implement, especially during integration, is paramount especially during the first 100 days after closing. In a turnaround acquisition, righting the ship and driving out costs while increasing efficiencies puts a premium on time and speed. When acquisitions must also be integrated with another organization, speed is necessary due to the power of people and their ability to resist change. No integration should be undertaken without a holistic and integrated 100-day plan uniquely tailored to each deal.
The highest opportunity for success occurs when the implementation is led by the same third-party advisor that participated in the due diligence and transaction phase.
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