Faster integration improves M&A success02 Apr 2014, Posted by Uncategorized in
Faster Integration Improves M&A success
A recent article published by Private Equity Wire reveals that although integration is not usually a topic in the headlines, it plays a critical role in achieving primary M&A goals.
An EY survey of over 200 executives around the world found that companies, on average, spent about 14 per cent of total deal value on integration. Eighty per cent of executives stated they would have quickened the pace of integration if they had to do the deal again.
After a merger or acquisition, companies can count on a familiar pattern: a hit to their bottom line that can last up to a year or longer; in the end, more than 70 per cent of M&A deals fail to deliver shareholder value, or even reach primary M&A goals, whether these are growth, geographic expansion or R&D.
The focus of the deal is usually placed on financials, redefining the customer value proposition, and re-evaluating the profit formula, without much consideration to the complexity of human behavior or communications.
The impact of corporate culture on company valuation is enormous and often overlooked. Slow or poor integration is estimated to be responsible for over 30 per cent of productivity loss post deal.
Most senior executives agree that the single greatest cause for concern/risk in achieving M&A success is failure to effectively integrate the post deal entity to align with the strategic goals that drove the deal in the first place.
The article states “the best integration processes involve defining a clear rationale for the deal from the outset and ensuring that rationale sets the agenda for the integration strategy accordingly.”
Implementing a clear, measurable and repeatable integration strategy is key to a successful M&A, shortening the integration time and reducing expenditure and risk. With an average integration spend of about USD50m$ per deal (based on average deal size of disclosed transactions, source: Mergermarket), there is a lot at stake.
Read the full article here:
Alpha Global Experts is a high-touch, boutique consultancy firm focusing on Global Expansion and Culture for Business, helping companies maximize shareholder value after a merger or acquisition. We help reduce the pain, risks, cost and time of integration and build a high performance culture through a process that is measurable, tangible and repeatable.