It’s the beginning of a new year which brings interest in what the market will look like for the next 12 months, especially from a merger and acquisition (M&A) standpoint. What do you anticipate? How ready is your organization if an M&A is on the horizon?
When key market stakeholders were recently asked, most expected an increase in M&A activity for 2017. According to Deloitte’s 2016 year-end report of M&A trends, here are the results from 1000 business professionals who were surveyed:
- 71 percent of corporate executives expected an increase in the number of deals in the next 12 months
- 86 percent of private equity investors expected an increase in the next 12 months
- 64 percent respondents anticipated the average size of transactions in 2017 will exceed those in 2016
With this increase in M&A deals, there is the assumption that they will be beneficial to the organizations involved in them. Unfortunately, this is not always the case. In fact, 91 percent of survey respondents reported that deals done within the last two years did not yield the expected value or return on investment (ROI). When asked what the biggest impediments were to successful M&As, the majority cited insufficient due diligence (88 percent of respondents) and failure to effectively integrate (78 percent of respondents). Furthermore, effective integration was identified as the most important factor in achieving a successful M&A transaction.
If M&As are a vital part of your company’s strategy, give some thought to the following lessons learned from companies I have worked with across industries.
Offset Enticement with Prudence
Potential M&A opportunities can surface even when you are not looking for them, and some deals look too good to pass up. Don’t be overly enticed by an unexpected opportunity or by the potential promise of what could be. Gauge the capacity of your organization to take on this new opportunity given acquisitions and company initiatives currently underway. Even if an acquisition looks ideal, you are putting it at risk if your organization is maxed out on its capacity to handle it.
Make Culture a Priority
Preaching that culture fit is essential between your company and the organization you are considering for an M&A deal is a good thing. Just be sure that enough due diligence follows this statement to ensure the organization’s culture aligns well with that of your company. Sound due diligence here as well as the organization’s financials will help avoid a painful integration and a disappointing ROI.
Reduce Redundancy with Rigor
Once you make the decision to combine organizations, you are likely to have redundant roles with a mix of talent in them. Small M&As can make it easy to determine what roles are needed and who should sit in them. With larger, more complex M&As (like those expected in 2017), talented leaders may struggle to figure out where they fit in the “new world.” Many of them may become flight risks. Take the time to set up a robust assessment process to ensure the new, combined organization has the best people in place to lead it.
Change the Breadth and Depth
Putting the right leaders in place is a critical step, but don’t underestimate how much combining two organizations into one relies on change management. Announcing the deal and holding a few meetings will only get you so far. A broader, planned approach is needed. Employees may feel their positions are threatened because of the deal. So, dedicate time to manage their expectations and guide them through the transition. Helping the organization deal with this change down to the individual employee level increases your likelihood of success.
In 2017, M&As are anticipated to increase in size and number. Doing a readiness check and building off lessons learned ensures the right deal is made and integration is efficient.
For more information, check out the following posts:
(Photo: Mergers and Acquisitions, NY – nyphotographic.com)