According to Robert T. Uhlaner and Andrew S. West of strategy consultants McKinsey in their paper titled “Running a Winning M&A Shop” “One of the most often overlooked, though seemingly obvious, elements of an effective M&A program is ensuring that every deal supports the corporate strategy”
Simply put ask yourself does the business I’m about to buy sit with my own corporate goals, whatever, they are. Too many acquisitions are the vanity project of senior executives bored with their day to day role and thus they seek to gain status by engaging in the purchase of companies without a clear acquisition strategy.
In a survey in the early 90s Coopers & Lybrand (now PWC) cited the following as reasons for successful acquisitions:
• Detailed post acquisition plans and speed of implementation.
• A clear purpose for making acquisitions
• Good cultural fit
• High degree of management co-operation
• In-depth knowledge of the acquiree and its industry
In the same survey the following have been identified as reasons for failure:
• Target management attitudes and cultural differences
• Little or no post-acquisition planning
• Lack of knowledge of industry or target
• Poor management
• Little or no experience of acquisitions
Having worked with many prospective buyers over a long period of time the above points shine through each and every occasion. A successful buyer stands out from the crowd in that they are prepared from the initial enquiry and all their ground work has been done from the outset.
According to the Boston Consulting Group acquisitions are successful because organisations will have:
• Defined the role of M&A in the Corporate Strategy
• Conducted high resolution valuations
• Developed a disciplined integration plan
Deloitte carried out an extensive examination of one of the world’s largest PMI (post-merger integration) databases at the University of Muenster in Germany and developed the following checklist to ensure transaction success:
1. Are the financial figures for the transaction sound?
2. Have the synergy goals been mapped out in enough detail?
3. Has the implementation concept a sufficient operational foundation?
4. Do the corporate structures fit well together?
5. Are core processes similar?
6. Has a management concept been worked out?
7. Have the required staff-related measures been itemized?
8. Is adequate PMI expertise available?
9. Is there enough human resource capacity on hand?
A common theme across all surveys and informed consultants is the need for preparation and planning. Develop a team of experts to assist you in the acquisition and ensure from the outset all advisors are thoroughly briefed in their role.