M&A Examining Why So Many Fail to Produce the Shareholder Returns Expected
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Transcript of M&A Examining Why So Many Fail to Produce the Shareholder Returns Expected
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Examining the Mystery of Examining the Mystery of M&A Transaction FailureM&A Transaction Failure
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The M&A Reality“The same sad story plays out time and time again in the aftermath of large-and small scale corporate mergers. …some 55 percent to 77 percent of completed M&As fail to meet the strategic and fiscal objectives that initially justified the deal.”
BearingPoint Institute
“In the one-year period after a “successful” merger, the average return for combined companies was 25 percent below their peers in the same industry. After 24 months, 80 percent of these new entities were still showing negative results”
Business Week
“…more than 50% of acquisitions reduce shareholder value or fail to meet expectations. Big deals with more complicated businesses are even less forgiving, and tend to yield twice as many losers as winners”
Ernst & Young
“The perception gap is wide – 93 percent of companies interviewed believed that their deal enhanced value, and over one third said that they would not do anything differently on their next deal. …objective assessment of whether deals enhanced or reduced value, showed that only 31 percent of these deals enhanced value.”
KPMG International
Key Learning: A poor post close integration phase is the #1 reason behind transaction failure.
Planning and Analysis
Key Learning: Most integration efforts are too little and start too late.
Staff Devoted to Integration
Key Learning: Integrations are typically done by people who are not trained nor expert at integration.
Integration Challenges
Interesting Fact: Contrary to popular belief, “Cultural Incompatibility” is rarely the main cause of post deal failure.
Control of Key Issues
Key Learning: More than half of all transactions are under estimated and under funded.
Value Driver Analysis
Best Practice: Build Executive consensus with a Value Driver Analysis and update the analysis periodically.
Integration Options
Integration Time >>
Sha
reho
lder
Val
ue >
> - Status Quo -
Bolt On
Adopt & Go
Green Field
Best Practice: An Adopt & Go or Green Field integration are best for obtaining better shareholder value in the long term
Executive Incentive Plans
Best Practice: Use the results of the Value Driver Analysis to set performance measures for leaders.
Communications Matrix
Best Practice: No Secrets, No Surprises, No Hype, No Empty Promises
Integration Approach
TE
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PROCESS
SPACE PLAN
PE
OP
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Best Practice: Start with process definition which will in-turn drive the form of the 3 enablers.
Change ManagementTechniques
• Peer Coaching
• Direct Involvement in the Redesign
• Executive Committee Presentations
• Q&A Hotline
• One-on-One Counsel
• Performance Measure and Annual Review Systems
• Direct Confrontation
• Special Events
Best Practice: Perform Stakeholder Analysis resulting in individual CM Techniques.
Speed in Transition
Memorable Quote: “If I had to do it over again, I would have done it faster.” William Zuendt, President Wells Fargo Bank commenting on their take over of First Interstate Bancorp.
ABOUT THE FIRM
M&A Integration Services has assisted its clientele in both pre and post close integration activities including:
Pre Close
• Due Diligence. The identification of opportunities for reducing expense or increasing cash flow leading to deal valuation improvement.
• Integration Planning. The building of comprehensive plans that are directly connected to deal goals and company strategic plan.
Post Close
• Operational Integration. The redesign of all four levers of change (i.e. process, technology, people and space plan) along with Change Management techniques.
• Reconciliation. The unbiased source of analysis and testimonial impacting arbitrated adjustments, holdbacks or bonuses.
Need your next or a previous transaction to produce the shareholder returns projected? Contact
Bryan Peregoff, Director
443-474-2004 in the United States.