Making mergers and acquisitions work

M&A
M&As require a holistic programme strategy for business integration

It’s a simple fact of business life that most M&As fail to live up to shareholder expectations.

One of the problems for most M&As is that beyond the headline announcement of the deal, many simply don’t deliver the shareholder and customer value anticipated. It’s a sobering thought but M&As are actually more likely to destroy shareholder value than create it. According to numerous reports, between 50 and 70 percent of M&As either fail outright or fall short of their desired goals.

One of the most common causes of failure is that the acquiring organisation simply doesn’t manage the end to end M&A process effectively. While the overall strategy and up front due-diligence may be solid, it’s the execution of change that goes off the rails.

From experience it’s the intangible assets that tend to cause the most challenges. These include people, politics and culture – all of which will be heightened in the tense and uncertain atmosphere that typically follows an M&A announcement. It is essential to recognise that the people affected will have anxieties and fears and there will be resistance to change. There must be a plan to deal with these head on and process to integrate the cultures that realises the best of both.   Failure on either count is likely to compromise the outcome of any merger or acquisition.

Then there’s IT, which is the other aspect that often determines the degree to which any M&A transaction will succeed. In many sectors a large percentage of all merger synergies are dependent directly upon IT and in some sectors, it is the IT integration process that effectively drives the merger timetable. Similarly, failure to integrate the respective IT infrastructures effectively, will inevitably result in a significant impact on the merger economics.

It is imperative that these (and other) downstream issues are identified and built into the M&A approach, rather than allowing all parties to get carried away in just ‘doing the deal’.

Change by any other name

For us, driving the business integration that flows from a merger or acquisition is no different to managing any other change programme. It comes down to getting the approach right, ensuring it’s planned, led and managed by people who know what they are doing, aligning all stakeholders around a clear and well communicated vision and driving this through to a practical reality that delivers the outcomes required.

For one client, a world leader in mobile software solutions for the telecommunications industry, we managed a post-acquisition business integration programme that built a competitive platform for future growth, whilst delivering operational synergies and significant cost reduction.

As part of this, we conducted an initial exercise to baseline the anticipated cost savings and post integration business plan and drove the change programme which delivered an integrated operational framework embracing people, process and technology across a multi-cultural, multi-location landscape. The likely people challenges were identified up front and a consultation process was initiated to facilitate two-way communication with staff and help address their concerns. The programme was a complete success, enabling the client to launch the integrated and newly branded company in line with market expectations.

The devil is in the detail

For whatever reasons it is undertaken, in our experience there really is no short-cut to making a post-acquisition integration work. It requires rigour in the planning and execution of your activity, effective due diligence, a viable integration plan, and the programme management capability on board to deliver it. We can deploy our capabilities from any point in the M&A lifecycle, from early stage assessment to downstream integration challenges and the management of complex business change.

As always the devil is in the detail but, if you’re facing the complexities of a post-acquisition integration, then we can work with you to understand what success looks like and how your business will be positively transformed as a result of the merger. We will then use this as a basis for developing a resilient, change-delivery framework within which we can co-ordinate, communicate, align manage and control delivery of all the interrelated activities involved.

Those organisations that can plan effectively before they buy will be the ones that avoid contributing to the M&A failure statistics and instead position themselves successfully for future growth.

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