The recent global recession has put pressure on companie to quickly leverage benefits from acquisitions or mergers and to deliver on the transactions strategy.
As Martin Siemers, associate director at PricewaterhouseCoopers (PwC), puts it: “Taking advantage of the value available during a merger as quickly as possible has become more important than ever. Companies can no longer mitigate the risk of over paying for a deal.”
According to Siemers, numerous surveys have highlighted due diligence as the most important pre-deal activity. “Due diligence is the process of establishing and identifying exactly what one is buying by identifying risk issues, deal breaker probabilities and potential price adjustments.”
Besides placing more emphasis and spending more time on the due diligence process, there is also an increasing focus on the identification and mitigation of post-deal issues. In many ways, a deal starts at completion, as from here, the benefits and value that the deal was designed to deliver need to be realised. The post deal integration process is about how synergies will be attained, how the combined business will be stabilised to preserve current value and ensure that one plus one adds up to more than two.
Siemers says, “Once a merger or acquisition has been completed, most corporates start to realise the enormity of the integration task ahead, rather than experiencing the elation of a successful deal.”
A global PwC survey performed in 2008 highlights the following challenges of a successful integration:
* Integrating IT systems and addressing HR matters (in particular, cultural issues and communications);
* The timeframe in which it is possible to make positive changes is very short; and
* Management in both organisations become distracted by the challenge of integration and business as usual performance suffers.
The final stages of a merger and acquisition timeline usually make or break a deal. The opportunity for creating (and destroying) value is greater during the post deal integration phase than they are at any previous point. The approach, analysis and planning that are engrained in the early stages of the process are what lay the foundation for those first 100 days and thus ultimately, for whether the deal itself is deemed a success.
Siemers adds: “Recent global surveys indicated that 70% of deals still fail to realise the value that they are expected to generate due to weak acquisition strategies or poor implementation. Our experience shows that more acquisitions fail as a result of not executing the strategy in a timely and co-ordinated manner, than due to a flawed strategy.”