Compatible Management Teams Are Critical to Successful Mergers and Acquisitions
By Mergermarket, a Partner of M&A Leadership Council
A new report from Kilberry in partnership with Mergermarket, A View from Both Sides: How PE Firms and Sellers Can Form Wise Partnerships, reveals that successful PE deals occur when a thorough two-way due diligence is practiced by both the PE investor and the target investment company.
One key area of potential growth for PE investors is to find companies with stellar management teams – and avoid targets with teams that are incompatible with their goals. At the same time, management teams need to understand whether an investor will make a good fit for their culture and working style.
Some of the key findings from the report include:
- PE investors think the quality of management at a target company contributes 31% to the success of a deal, while the company’s operating model/fundamentals contribute 37%, and the product 32%.
- More than a quarter (28%) of portfolio company executives said their PE investors were too involved in managing the business, and nearly a quarter (24%) of PE investors said the biggest challenge they faced with management teams was their reluctance to cede control of day-to-day management.
- The greatest number of PE investors (44%) said that external assessments were the most important formal method for evaluating a target company’s management team.