Two reports bring clarity to the upswing in activity the M&A community has been experiencing, and both are highly recommended reading if you haven’t already seen these. On June 30, 2014, DealBook headlined, “Mergers Hit a 7-Year High, Propelled by a Series of Blockbuster Deals.” On June 24 of the same year, FT Remark and Baker & McKenzie released Going Global: Strategy and Execution in Cross-border M&A,” a report highlighting survey findings from over 350 companies.

Allow me to highlight a few key data points from these publications, then suggest some important implications for integration and overall M&A capabilities in this type of deal environment.

Deal value. While total deal volume declined slightly from the first six months of 2013, according to Thomson Reuters, nearly $1.77 trillion of deals were announced in the first six months of 2014, up nearly 73 percent from the period a year earlier, and more than the first six months of any year since 2007.

Big deals came back. Valuations across the board are trending higher, and dealmakers are willing to pursue bigger transactions than in the previous several years. Forty-six deals worth more than $5 billion were announced in the first half of 2014, 130 percent more than in 2013. Among these, the headline-making mega deals including AT&T/DirecTV ($48.5B), Comcast/Time Warner Cable ($45B), and Facebook/WhatsApp ($19B).

"So what does all this mean for integrators? Simply put, it's time to 'batten down the hatches.'"

Cross-border deals. According to Mergermarket, the Baker & McKenzie study indicates that during Q1 2014, there were 1,087 international deals worth a total of $263 billion, close to a post-crisis high. Further, 86 percent of respondents to this study considered their last cross-border deal a success, and 34 percent plan to undertake further cross-border transactions during the next two years.

Transaction types. Divestitures continue to be active. There's a renewed level of unsolicited or hostile deals, with about $145 billion in hostile bids announced in the first half of 2014, including the $53 billion hostile attempt by Valeant Pharmaceuticals to acquire Allergan. Tax inversion deals were increasingly considered. Under this structure, an American buyer could seek an international target which would enable them to reincorporate in a tax-friendly country such as Ireland or the Netherlands.

Deal motives and rewards. With record amounts of cash remaining on balance sheets, and with favorable debt markets, buyers have an abundance of dry powder. Financial and capitalization oriented strategies for boosting stock prices such as cost cutting, stock buybacks and special dividends have already been deployed during the recession, and executives must look elsewhere for growth. The rising stock market generally rewards acquirers, leading to additional confidence to pursue more deals.

So what does all this mean for integrators? Simply put, it's time to “batten down the hatches.” We need to be prepared not just for more deals, that’s a given. We need to be prepared for more complex transaction types, more global deals, larger deals and deals occurring in more rapid succession.

Here’s a quick checklist of possible considerations to help you prepare for what almost certainly will continue to be a very active M&A market.

• Tune-up your M&A processes. Only 40 percent of respondents to the M&A Partners survey, the State of M&A Integration Effectiveness™ 2014, reported they had a comprehensive end-to-end M&A business process framework in place. As illustrated in this week’s downloadable resource, Survey Highlights: M&A Capabilities & Readiness, what’s even more alarming is that a full 68 percent of respondents acknowledged the overall state of their M&A capabilities and readiness was “very poor, poor or average.” Only 7 percent rated their overall M&A capabilities and readiness level as “outstanding.”
• Train your key M&A resources. Another deficit was illustrated in our survey: the failure to train key M&A resources, at all levels and roles. Take note of the chart in this week’s download. Across the board, there was no training provided by roughly 55 to 75 percent of respondents. And yet, these companies are relying upon M&A to grow. Is there any doubt why deal failure and underperformance are still the norm?
• Tailor your integration approach to transaction type. Build scenarios into your playbook now for divestitures, joint ventures, unsolicited / hostile deals.
• Coordinate and align advisors. Our view is that M&A is a team sport with many different skills sets. But increased deal complexity and volume may strain “the way you’ve always done it before.” Make sure you standardize all advisors on your process versus running three to four different due diligence checklists and three to four different integration processes handed to you by your advisors.
• Globalize your M&A skills. Based on your most likely next cross-border deal or global regional strategic focus, build additional depth and breadth in your team and playbook to support country-specific, region-specific, or strategy-specific requirements that you can reasonably anticipate now.
• Don’t forget the fundamentals. Your skills at culture, communications and change will be even more important with increased deal volume, complexity and scale. McKinsey & Company produced a study finding that the top need for improvement in M&A integration was assessment of culture and organizational capability.
• Get the resourcing component right. The importance of adequate staffing / resourcing was cited in two different aspects in our recent survey, the State of M&A Integration Effectiveness™ 2014. We asked those taking our surveys: “What is your most important break-through or best practice with integration?” and “What is your greatest remaining obstacle that you must overcome to achieve more consistent integration success?” – adequate staffing with experienced integration resources was the number-one answer to both questions.