The Reality of Mergers & Acquisitions: A Detailed Look at Navigating the Path to Success

Proven Best Practices to Achieve Post M&A Success

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Strategies for Post-Merger Success: Best Practices Revealed

Mergers and acquisitions (M&A) often face significant challenges, with up to 85% of deals failing to deliver value, according to studies. However, companies with well-defined strategies and robust post-merger integration (PMI) practices can achieve strategic growth and lasting competitive advantages. High-performing deals demonstrate the importance of effective planning, coordination, and execution.

 

It’s essential to confront the challenging reality of mergers and acquisitions (M&A). Research from HBR indicates that a substantial 60% of significant mergers destroy shareholder value. Other studies reveal deal failure rates ranging from 50% to 85%. A KPMG study found that 83% of deals fail to deliver any discernible business benefit, and a separate study by A.T. Kearney concluded that total returns on M&A were negative. Despite these discouraging statistics, companies with well-defined M&A strategies can still use deal-making for strategic growth. The key is to proactively implement measures that maximise the chance of success.

High-performing deals do exist, and Deloitte acknowledges this, noting that acquirers associated with these deals grew faster than they would have without the acquisitions. These companies reported higher actual revenues three years after the deal closed than what was initially projected. The increasing volume of M&A transactions, along with the global and technological complexity, has led to shorter timelines for deal closing and integration. However, successful companies aren’t just finding better deals, but are better at coordinating, planning, and executing all relevant areas of integration.

 

Well-managed M&A provides an enduring competitive advantage. To maximise this advantage, businesses should focus on these seven core integration strategies:

 

1. Prepare in Advance: Maximising deal value begins in the earliest stages. A ‘preliminary integration assessment’ is crucial to determine if a deal is compatible and can achieve value, regardless of the quality of integration processes. At this stage, companies should answer a set of basic rationale questions that have been previously agreed upon. This assessment may disqualify opportunities before further due diligence because synergies are too elusive, perhaps due to unmanageable cultural clashes, merger or asset transfer laws, or practical incompatibilities.

 

2. Define Success Factors: Every acquisition presents unique business, operational, and cultural benefits, as well as challenges. Companies need to establish a consistent set of success factors that guide integration efforts. These act as compass points throughout the process. Common success factors include: 

  • Ensuring stability and operational continuity.
  • Maintaining customer focus.
  • Securing and increasing value.
  • Actively integrating cultures.
  • Emphasising employee communication, well-being, and retention.
  • Aligning strategy, processes, and mission-critical systems, like IT and financial reporting.

3. Day One Readiness: Day One represents the first official day that the acquiring company becomes the new owner or when operations are aligned. Leaders must address three core areas: communications, operative structure, and systems and controls. Thoughtful, planned communication shares important information and builds trust. Defining the operational structure and reporting procedure is a Day One requirement, and HR should play an important role in these shifts. Continuation of financial and sales reporting is crucial, and clear instructions with ready-made forms and templates should be available from Day One.

 

4. Define Objectives: Building on the idea of success factors, deal objectives need to be clearly established and communicated. These objectives have a more deal-specific flavour and will be drawn from considerations around: the underlying logic of the deal, its structural nature, system integration planning, schedule optimisation, investor return expectations and other commercial or strategic rationale.

 

5. Prioritise Activities – Day One to 100: Instead of immediately diving into tasks, teams need to work from a prioritised list of activities and establish coordinated action plans. The First 100 Days represent a high-visibility window in which the critical path toward value realisation and change management is set. An integration strategy must include staged deliverables in separate phases to reduce implementation risks. This is also where companies assess their pre-purchase phase findings and build relationships with the acquired entity leadership, employees, and key customers.

 

6. Link Due Diligence to PMI: Information transfer from the acquisition team to the integration team is often incomplete. The integration team may not fully understand the deal strategy or objectives, leading to wasted resources or neglected deal-critical issues.

 

7. Report & Collaborate in Real Time: Effective post-merger integration management includes regular reporting, reviews against set goals, and feedback. Examples of reports include team/stream reports, integration manager reports, market/country reports, integration steering group reports, board reports, owner reports, and learnings/post-mortem reports. Throughout the integration process the acquisition team will need to drive collaboration and sharing with integration heads, and this should be done on a collaborative platform, instead of email and static spreadsheets.

 

Takeaway:

Making deal expectations a reality is achieved when process-focused attention is invested in the integration fundamentals. The areas of post-merger integration are interconnected, and improving one is likely to have a positive impact on others. While specifics may be tailored to the acquirer’s current business and reality, consider growing integration competencies by focusing on these seven core practice areas.

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