Whether the objective is obtaining a new business unit by acquisition or merger, re-organizing different divisions of a company or building up an in-depth partnership, a successful integration can be a challenge. Creating an operative base to reach strategic M&A goals may take a long time – indeed, integration processes often take much longer than expected, causing frustration and requiring patience from both parties.
The impetus for corporate venturing is obvious: a corporation’s investment in startup companies can create new means to drive growth, financial return and advance strategic priorities.
Technological advancement is changing the way companies compete. The torrid pace of innovation requires commitment to digital transformation in a way that few companies can keep up with using internal capabilities alone. This is why M&A transaction rates continue to climb - see here. Companies with well-oiled deal processes find that these campaigns safeguard and advance their business models, while keeping them at the forefront of industry leadership.
First, the bad news. HBR cites research suggesting that 60% of significant mergers actually destroy shareholder value. Other published research notes deal failure rates of anywhere between 50% and 85%. One KPMG study found that 83% of deals were unsuccessful in delivering any discernible business benefit. While a separate study by A.T. Kearney concluded that total returns on M&A were negative (source).
For many companies, M&A pipeline management is a misnomer. The term suggests an organized, collaborative and efficient evaluation of targets. In reality, it often resembles a clumsy lurch through the deal process where companies are left hoping that value awaits on the other side.
- How employees drive the value of a deal;
- The key inflection points of acquired employees to better understand the basic neuroscience and psychology affecting acquired employees;
- Best practices for communicating with acquired employees;
- 5 things you can do immediately to improve employee-related deal outcomes.
Due diligence is the crucial stage in the deal life-cycle where an acquirer builds the full picture of financial, tax, legal, operational and human resource realities within a target company. But so commonplace is the idea of basic due diligence that companies often get lulled into complacency. Consider the implication of the due diligence stage on a deal. Here a company discovers an answer to the critical question: is the deal ROI in the right proportion to the risks, requirements and expected management effort that is uncovered through the due diligence process?
In M&A, successful deal outcomes hinge on the ability to prospect well then start, sustain and repeat a cycle of deal steps. Companies with track records of M&A-led growth do this exceptionally well. The success is no accident; it's built through a well-defined, repeatable and systematic internal processes.
The recently announced “tax repatriation holiday” could have a favorable impact on M&A activity in 2018. This new tax plan will permit companies to transfer (repatriate) cash back to the US under a much lower tax rate. Prior to these changes, many companies have seen a large proportion of their cash reserves effectively locked-up overseas.
Closing a deal is difficult – however, the capturing of synergies post-deal is arguably even more difficult. The objective of M&A is to create value – yet once the dust has settled following closing and “deal fever” diminished, it is easy for an acquirer to lose sight of the goal of synergy capture.