Mergers & Acquisitions
Achieving Success in Mergers and Acquisitions: More Than Just Numbers
The Unsettling Statistics
Data shows that most mergers & acquisitions (M&A) deals fail to boost shareholder returns, highlighting the difficulties and challenges on the road to M&A success.
Whether you're on the buying or selling end of the deal, participating in an M&A can be a transformative experience for your business. The M&A journey is a rollercoaster of emotions, characterized by the highs of success and the lows of unmet expectations.
What Constitutes Success?
Beyond mere financial metrics and power, dynamics are crucial for gauging effectiveness. In successful M&As, financial gains—often termed "mutual benefits"—serve as a byproduct rather than the end goal. Studies suggest that M&As aiming for long-term synergies rather than quick gains have a 30% higher success rate.
The Troubling Reality
More than half of M&As fail to deliver the expected value, often due to negligent oversight of customer interests, which are, ironically, the lifeblood of a business’s revenue stream.
The Importance of Ethics
Adhering to ethical principles can't be stressed enough. An ethically sound approach balances the quest for financial gains with the well-being of all stakeholders involved, ensuring the long-term success of the newly formed or acquired entity.
Best Practices for a Successful M&A
Comprehensive Due Diligence: Don't just examine the numbers; examine the target company's culture, client relationships (wins and losses) and operational aspects.
Involve Key Stakeholders: Make sure that major stakeholders, including clients and employees, are involved in the M&A process. This helps in gauging the impact on these groups and planning accordingly.
Ethical Decision-Making: Evaluate the ethical implications of the merger or acquisition. This ensures that the deal benefits a broader group of stakeholders and not just the executives or shareholders.
Long-term Focus: Don't look for just immediate gains. Consider how the M&A will contribute to long-term goals and sustain customer relationships.
Transparent Communication: Keep all involved parties informed about the progress and changes in the M&A process. Transparency helps mitigate risks and keep the trust intact.
You don't know what you don't know.
Communication breakdowns and vacuums.
Competitors are likened to circling sharks, seizing the opportunity to exploit vulnerabilities.
Conflicting priorities between the parties involved.
Disruptions to clients, vendors, and Managed Service Provider (MSP) services.
Lack of leadership direction and strategy.
Insufficient project planning methodologies.
Inadequate resource capacity planning.
Merging of corporate cultures.
Proactive Risk Mitigation
Confirmation of Service Level Agreement (SLA) commitments.
Requiring performance guarantees with penalties to minimize client disruption.
Conducting skip-level meetings between the client and the MSP team.
UK: HR involvement in identifying TUPE (Transfer of Undertakings Protection of Employment) or similar options for the team.
Establishing client/vendor forums.
Confirmation of contract termination obligations.
Exploring contract assignment options.
Defining an exit strategy.
Requiring a detailed project plan.
Establishing a communication cadence.