6 Lessons Learned from High-Performing Mergers and AcquisitionsAugust 9, 2018
Already, this year is shaping up to be another huge one for mergers and acquisitions. PwC says there have already been $30 billion more deals announced so far in 2018 than in all of 2017. The deals are also getting bigger, with 50% more deals larger than $5 billion.
And the deals are getting more complicated. That’s because 54% of companies are now trying to use mergers to transform their business in this digital age. They hope that the acquired company can help them get into new markets, innovate, and stay competitive with digital-native peers.
But with anywhere between 70%–90% of mergers going sideways, how can organizations be sure that these bigger, more complex deals stay on track? Turns out, there are a few things that successful deal-makers do differently. We read between the lines of PwC’s ongoing M&A integration survey and plucked out the key lessons learned from big deals last year.
1. Talk integration earlier
Since PwC first started doing this survey, they’ve seen a trend toward companies launching integration teams into action earlier and earlier in the deal process. You don’t need to wait to start talking about integration in the due diligence phase. Instead, talk about integration as soon as you start screening the deal. And stay open-minded about whether you can even realistically integrate the target company, especially if it’s dramatically different than your own.
2. Move quickly for quick wins
In a merger, timing is everything. The longer you drag it out, the more confusion you breed, the more talent you lose, and the less likely you are to achieve your goals. So the time between when you announce and close the deal—as well as the first days and months after close—are critical.
The good news is that many companies are integrating faster than ever before. For example, more than 80% of high-performing deals take 6 months or less to align their leadership and operating policies. As a result, more than 82% of companies are seeing quicker wins in their profitability and cash flow.
3. Communicate and manage change
The survey also finds that high-performing deals tend to have resources dedicated to cross-functional areas like communications (90%) and managing change across their processes and systems (88%). PwC suggests that you set up a formal Integration Management Office to help mastermind the effort over the long term. And make sure to set up a strong change management program with a set of concrete action items tied to the deal’s goals.
4. Stay in it for the long haul
Since PwC’s very first integration survey in 1997, companies have consistently named two top challenges after a deal closes: integrating people and IT systems. Reason being, this phase of integration can take months or even years. It can be easy for the effort to peter out as people get distracted by other things that come up.
But deals do better when you treat them as an ongoing project, with dedicated leaders and personnel. High-performing deals tend to have full-time people across many areas of the business. For example, 60% of successful deals have an active executive sponsor (60%). All of them get support from HR and finance. And then 80%–90% have dedicated teams from IT, sales and marketing, and operations.
5. Measure what matters
Going along with the above, successful deal-makers take the time to track key cost and revenue metrics for the deal. For example, many more companies are starting to track things like revenue growth, sales of new products out of the deal, targeted headcount reduction, integration costs, and cost savings due to integration. And they keep tracking and tweaking until they get the results they want.
6. Tie results to compensation
A great way to keep top leaders invested in long-term integration is to tie it to their paychecks. A decade ago, the success of deals more often affected the heads of departments. But these days, successful deal-makers are taking it up a notch and tying their M&A goals directly to CEO, CFO, and CIO compensation and board member incentives.
Bonus tip: Engage an expert to speed your merger
Successful deal-makers don’t go it alone. Gartner finds that more than half of organizations reach out for technology integration during their merger. We at Binary Tree are standing by to speed your IT integration, with end-to-end M&A solutions that can help you:
To find out more about how we can help, get in touch.