In a new report titled “Doing Deals in Tough Times”, KPMG has separated 160 European and US companies into two groups: M&A Champions, which achieved their projected deal synergies more than 75% of the time; and Less Successful Companies, which achieved projected synergies less than 75% of the time.
According to the report, the five attributes and practices that set the most successful deal teams apart from their competitors are:
1. Using due diligence to examine a wider range of business issues.
M&A Champions spent a third more time on non-accounting issues during due diligence than the Less Successful Companies. This is achieved through greater use of business unit personnel who bring expertise on commercial and operational issues and also through more extensive engagement with external parties such as customers, suppliers and business partners.
2. Maintaining involvement of the M&A team post-deal
The more successful deal-doers assigned responsibility to the M&A team for many post-deal activities such as monitoring achievement of targets relating to revenue synergies and cost savings. Also, these M&A teams were required to conduct a formal review of the success of the acquisition, typically within 12 months of the deal.
3. Dedicating the right people to the integration team
M&A Champions were more likely to have dedicated integration teams within their organisations. Also, those assigned to the integration were more likely to become permanent members of the management team of the target, thus ensuring continuity between the integration efforts and the on-going business
4. Effective management of cross-functional interdependencies
The more successful companies recognised the complexity of integration issues and more effectively managed the inter-dependencies between functions as opposed to those companies that took a silo approach and dealt with integration issues in isolation
5. Focus on stabilising the organisation post-close
90% of the top acquirers considered the stabilisation of the business to be one of their top 3 post-deal priorities. The early introduction of major change is identified as a key part of this stabilisation as it eliminates uncertainty and allows for focus on the job in hand
The KPMG research also examined how M&A champions organised their deal-making units to help ensure that they execute these leading practices on every transaction. The study discusses a variety of organisational characteristics, including team size, reporting structure, skill composition, recruiting practices, tools and training, and compensation – among others.
You can download the full report here
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.