Why M&A? When?

M&A Startegy is part of the company’s overall corporate growth strategy. Companies are under pressure to deliver higher growth in revenues and earnings by pursuing an M&A driven growth strategy to further increase shareholder value for the investors.  

Board of directors or executive management may identify opportunities anytime. If there is a change in market fundamentals driven by technology, globalization, regulation or other competitive forces, M&A may become a necessity. When market conditions are favorable, and necessary financing and a suitable target with the right strategic fit are both available, the opportunity meets the need.

Perceived opportunities could include any combination of the following drivers to create competitive advantage and shareholder value: 

(a) Grow market share by providing access to new distribution channels, markets and products, or add new capabilities, including access to technology, or know-how, or access to talent to drive growth

(b) Operational synergies like consolidation due to overcapacity, or achieve competitive advantage through increased sale or scope to improve operations, cost savings and efficiency opportunities through technology, globalization, regulation and other market developments

(c) Boost revenue and margin growth through leveraging specific customer focused initiatives to create long term value including improved go-to-market (GTM) strategy and achieve higher revenue goals through specific value-creation pursuits including broaden product and service offerings, expand geographically, acquire R&D and other talent, attain better positioning in the value chain, enhance brand management, or improve customer experience.

(d) Transform the business by creating new ways of doing business to sustain or improve competitive positioning by creation of a distinctively new value proposition for customers, altering fundamentals of how money is made in the industry, creating resource advantages in serving the customer (like people, technology, facilities, channels, brands) or re-engineering of process to deliver value to customers (faster, better, lower cost).

Common mistakes in an M&A Transaction

High percentage of M&A transactions fail to realize their expected synergies, growth targets and internal rates of returns (IRR). There is a risk of overall drop in productivity in the near term, resulting in loss of focus on customers, channel partners, employee morale, and operational KPIs.

Common mistakes during a transaction include:

(a) Improper planning (need to keep focus on value creation and synergy targets), (b) Failure to move the discovery process along expeditiously (lose momentum, failure to uncover all synergy savings, efficiency, and top line enhancements opportunities), (c) Poor due diligence (validate assumptions, uncover potential issues, exposure to negative synergies), (d) Absence of information security (protect propriety information), (e) Paying substantially more than fair value (be prepared to walk away if value is not supported), (f) Inflated expectations and assumptions result in lack of discipline and perspective (don’t ignore any “red flags”), (g) Failure to create focus during the integration process and involve front-line operating personnel (develop integration plan before deal-closing, collaborate closely with operations), (h) Failure to deliver on expectations resulting in posts-acquisition issues (realize “quick wins” early, avoid “integration fatigue”, need strong PMO), (i) Forgetting that culture matters and failing to get the “people issues” right (win hearts and minds, embrace key resources, provide line of sight into future), (j) Lack of transparency during the integration process (need effective change management communications during integration). 

Mergers & Acquisitions (M&A) Process

M&A Buy Side and Sell Side Activities