While good deals are still being completed, acquirers must focus on integration if they are to truly benefit from the transaction. Post-deal control is fundamental in making sure that deal value is not lost, says Andy Argyle, head of KPMG’s Transaction Services team in the Midlands
Despite the changes in the global financial markets impacting upon the number of transactions being completed, there are still deals being done.
And for those deals, making sure they provide the value that is in line with the purchase price will be escalating up the agenda.
Winning the deal is only half the job. Delivering the value promises made during the deal process is critical.
There is a delicate balance between trying to realise the value in the quickest possible timescales and minimising disruption to the two underlying businesses.
The importance of pre-deal planning is frequently underestimated.
As a result, businesses looking at transactions, especially in today’s environment, must start planning early and if possible, get a dedicated team on the case to create a smooth integration process.I
t’s critical the leadership team responsible for managing the new business is identified and operational soon after Day One, as they must be (and be seen to be) actively involved in the integration.
Assigning synergy targets to each director is a good way of securing the required buy-in, although linking synergy targets to remuneration/bonus payments is a better way to obtain their complete focus and commitment.
Post-deal control is fundamental in ensuring deal value is not lost.
Business integration creates a complex business environment where there is a need to manage groups of inter-related projects as part of a broader programme of change.
However, issues surrounding the cultural differences between two organisations are not usually dealt with effectively – much to the regret of the acquirer.
How quickly a business integrates will also be crucial in limiting value leakage. KPMG research has shown that on average, it took nine months for companies to feel they had control of the significant issues facing the business post-deal.
According to research carried out by KPMG, the transactions which are more successful in quickly gaining control and creating value are where:
* There is a robust and well-managed governance process
* Priorities are allocated to the activities to be carried out
* Clear decisions are taken about how and by whom the activities should be handled.
While traditional project management techniques will help to control time, cost and quality integration programmes demand a broader, co-ordinated benefit-driven approach reflecting their far higher strategic and financial risk.
Integrating successfully at this level is fundamental in gaining the support of employees.
Experience shows us that in today’s environment, the honeymoon period for companies post merger is 100 days, with employees expecting answers as soon as the deal is closed.
If employees are not satisfied, they will vote with their feet.
Confusion, uncertainty and poor morale really do matter — and it can have a significant impact upon the post-deal value realisation.
In today’s financial and economic climate, what an acquirer does post deal will define success or failure.
The deal does not in itself create value, rather it gives management the opportunity to deliver the upside post deal.