Holistic Approach to M&A

Here is a short story how I viewed the corporate M&A world in 2012, and my colleagues and I at Midaxo wanted to change the way M&A was done. It highlights the relevance of towards holistic, more predictable and successful M&A.

Post updated on March 2, 2017

Changes in M&A during the last 5 years

All of the above was wishful thinking and would have required from the companies “an army” of special M&A experienced resources. Some companies used consultants, but there was little learning in the skills of the companies’ own personnel. There were some technology solutions in the market, but they all required quite a lot of software tailoring and consulting support. These improved the situation, but as M&A is normally very hectic time in a company the people getting involved had a hard time to digest additional new tools. The breakthrough happened when Midaxo applied the latest cloud and SaaS technology making true end-to-end solution available to all companies, M&A teams and consultants.

Midaxo is an M&A-specific platform built by M&A professionals, for M&A professionals. The platform allows companies to build their own company process, continuously improve the process while using it, have transparency of the progress, define user rights and share information internally and externally. There is still many things to improve and add, but now we are fortunate to work on these together with the users, our customers.

M&A process back in the days

My first exposure to M&A was in 1987. Since that I was involved in buying and integrating several cases, all that, of course, on top of my daily work. After corporate life I worked ten years as an M&A coach and consultant. I kept continuously hearing about the high failure rate of M&A’s, ranging from 50 to 70 per cent. A large amount of money, time and resources was spent on them and many people’s lives are impacted by the deals. Still, the M&A process was one of the worst, least developed business processes today.

Fortunately, exceptions did exist and some experienced companies had learned to gain considerable value from their deals. Studies show that the most successful are companies that acquire smaller (and, repetitively, similar) companies. Learning took place but the improvement is slow. There was clearly a need for major improvement on how M&A’s are managed and processed.


How did we come to this?

Many company executives and managers view M&A still as a one-off event or as a single project. The focus is often mainly on the transaction and due diligence phase. First timers, especially, but unfortunately also many experienced leaders, think that when the deal is signed their work is done and the operational line can take care of the integration.

Companies often have tendency to underestimate the complexity of the integration phase in M&A. The expectations a buyer builds during the transaction and deal announcement phases are harder to materialize than expected. Integration takes far more time than anticipated and management focus is needed throughout the whole M&A. Also, resources and experience to implement the required changes are often in short supply.

You can download a sample PMI template here.

Companies I worked with have experienced that an M&A case is typically a combination of big decisions and detailed tasks. It is too often performed on top of normal daily responsibilities requiring quick decisions mostly with limited data and time. There is a need for continuous multi-level communication and regular reporting. I also learned that M&A projects are about people, process, and management practices. Participants, those affected by the decisions and all other stakeholders must be motivated, involved and kept informed.

From several discussions with my consulting customers, I came to the conclusion that M&A must be managed as an end-to-end process combined with a well-planned and implemented incentive/reward system as well as systematic structuring. This, from strategy to finish – reaching the expected value through a holistic M&A approach – is the way to speed up the learning curve and improve the M&A success rate.

Holistic M&A – from a siloed approach to an end-to-end process

The purpose is to improve the buyer company’s shareholder value. M&A is a way to fulfill the company’s overall strategy. Traditionally, M&A is seen to consist of two main phases, transaction with due diligence and integration, where the focus has been very much on the transaction phase. Due to the uncertainty of the deal, the transaction phase is normally handled by a small number of people from the buyer company with several external advisors. Integration, in turn, involves more people and is often executed only jointly by both the buyer’s and target company’s management as well as employees, many of whom have no previous M&A experience.

This “dual” approach creates potential problems. The purpose and goals of the two phases are quite different, as are the compositions of the teams conducting them. The transaction team is responsible for getting the deal done at an acceptable price and to guarantee that there are no hidden surprises. The integration team has the responsibility of generating the expected business value and synergies, very often without having been involved in setting the goals.

This two-stage thinking becomes even more challenging in cases like auction deals, where information is limited or gained late during the transaction phase. This calls for rapid data collection during integration. The less data collected during the transaction phase, the more and faster these information and data gaps must be filled immediately after change of ownership.

Information and progress sharing between the teams is, in most M&A cases, far too limited. However, the more experience companies have with M&A, the more often they appoint managers responsible for integration as members of the transaction team and get them involved in the process as early as possible.

To improve the continually poor M&A success rate and to gain better value from M&A deals, we need to change our approach and start to view M&A as a holistic process. All M&A phases starting from the strategic decision through target selection, transaction to integration and post-integration learning are sub-phases of the holistic approach. It is also important to appoint one leader/owner to whom the transaction and integration managers, as well as all other responsible managers, report to. Equally important is to prepare clear and easily measurable incentives and rewards to support the fulfillment of the M&A goals and to capture possible synergies.