How can organizations ensure both a successful M&A initiative and increased shareholder value? The key is to avoid “landmines” that can derail a potentially successful deal. Here are the top 5 issues that must be addressed, preferably before even the negotiation stage.
#1 Realistic, achievable, and documented goals of the M&A deal
There is often a breakdown between the ultimate goal of a deal and the anticipated impact on shareholder value. For example, the classic goals of a deal include: increasing market share, introducing new products or services, opening new geographical markets, and/or gaining control of the supply chain. But what impact does achieving one or more of these goals have on shareholder value and what is the process for accomplishing them?
#2 Developing and adhering to a playbook
Using a sports analogy, a playbook contains descriptions and diagrams of the plays of the team. It should also explain tactics that the team understands and has practiced extensively. The same approach applies to successful M&A deals. The playbook is understood by each of the players but if they’ve never practiced the plays, how can they be expected to achieve the goal? It’s so basic that even pee-wee football teams use play books.
#3 Education, Training & Communication (ETC)
Change management within a single organization is difficult, but managing change across multiple organizations simultaneously is often doomed from the start by inadequate or inexperienced resources. Education, Training, and Communication (ETC) on changes in the new business model will allow all employees to begin the change process to adapting to a new environment.
#4 Cultural assessment and integration plan
Cultural differences are often recognized but ignored or completely overlooked. Those responsible for cultural assessments can easily misidentify what is fundamental or essential to the organization’s culture and, therefore, develop an inappropriate cultural integration plan. At the same time, internal communication is often neglected as management seeks to quell market response, client concerns and regulatory approval. Engagement with the acquired staff both early and often is one of the most practical ways to break down cultural differences.
#5 Post-close execution
The post-close execution process is by far the largest contributor to disappointing M&A results and can significantly diminish shareholder value. Unfortunately, many simply hope the post-close execution phase is a success, but hope is not a strategy. Deal makers are often shortsighted and seek a quick return on investment. Managing the integration with a defined budget and integrating the new company into the normal business functions is critical to success.
Jim Szakacs | CAO | TayganPoint Consulting Group | firstname.lastname@example.org