Why do so many Mergers & Acquisitions fail?


Why do so many Mergers & Acquisitions fail?


By Andy Langridge, Business Transformation Practice Lead, Monitor Consulting


According to PWC  “Two out of three acquisitions destroy value rather than create it”The main contributor to this eye-opening statistic is poorly planned integration resulting in sub-optimal delivery and non-realised benefits during the post-merger integration phase.

The effort involved in planning the integration of an acquisition is frequently underestimated or not addressed early enough.  In the early phases, the bulk of effort, focus and funding is targeted on completing the deal.  This can entail teams of lawyers, advisors, commercial specialists and business SMEs, gathering, analysing information and negotiating “the deal”.  This period is frenetic, with long hours and short deadlines to be met.  Often there is neither the capacity or time to address the post deal integration planning to the appropriate level of detail.  A document such as a Transition Services Agreement (TSA) will often be created to guide the key activities and timelines post-signing, but generally does not include relevant inputs from key business personnel.  This can result in hidden and unforeseen implications during the integration, resulting in commercial penalties.

On a recent assignment, a global organisation had acquired several hundred retail outlets from a competitor.  The TSA required all of these sites to be cut over to the acquirer within a 6 month period.  To the team that drafted the TSA, this appeared reasonable.   However, they had not foreseen or adequately considered some of the IT challenges.  Once the integration delivery phase commenced, it became apparent that the Telco responsible for delivery of external links to these outlets could not be delivered in the 6 month timeframe, and there were no alternate solutions that provided the necessary levels of security to meet corporate requirements.

The devil is always in the detail, and this particular issue could have been addressed and managed with no impact, if the relevant IT specialists had been engaged earlier in the integration planning phase.

Our approach to planning looks at 5 key elements which are the key levers for the construction of a robust integration roadmap:

  • What is the strategic driver for the deal?
  • Is there a time imperative for the integration?
  • What will the merged IT and business architecture look like?
  • What is the preferred end state culture?
  • What is the scope of the integration?

Monitor Consulting has a team of specialists who can help to build and execute a comprehensive integration plan and help protect the expected benefits of the acquisition.  The key to success is to engage these specialists at the right time, and not after the deal has been finalised.

 

For any further information, please contact Andy Langridge: andy.langridge@monitorconsulting.com.au


This blog post is written by Andy Langridge. Andy is a business transformation leader with an exceptional track record leading large, national change programs, restructuring complex business environments and refining business operations for bottom line growth and an enhanced customer experience.



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