Understanding the concept of Deal-type DNA (introduced in my last blog, Aug 19, 2013) as a means to avoid epic integration failure is really just part of the equation. Another mission-critical aspect is based on the role of the buyer (see my blog, Aug 5, 2013). Before we can establish the integration strategy framework, we have to determine how we will create value from the acquired business. Taken together, Deal-type DNA and the buyer's
There is no doubt that the pursuit of certainty in M&A is on the rise. With the advent of new rules and regulations pressing boards and corporate leadership, M&A deals are not only better scrutinized from the outside, but are being more deeply assessed from the inside. In a recent article in WSJ CFO Journal, it was announced that only “2.1% of deals have been scuttled as of July 31 of this year.”
On paper at least, maximizing financial proceeds to the selling company's owners and shareholders— a commonsense criteria for determining the seller’s degree of M&A success and effectiveness--is straightforward.
We talk a lot about various failure factors from a standpoint of helping executives recognize what to do and not do in the midst of a live and fast-moving deal. But not all failure factors are created equal, as they say. For my two cents, avoiding an epic failure during integration all begins with a clear understanding of what we like to call “Deal-type DNA,” or the fundamental code of what really drives value in a given transaction.
Focusing on Key Elements in the Life Cycle of the M&A Deal
By Jack Prouty, President M&A Leadership Council
There’s an old saying in the M&A business, “Bad planning and execution will kill a good deal every time, but the best diligence and integration will never save a bad deal.” For valid reasons, there’s so much attention placed on failure factors in due diligence and integration that the role of deal strategy in overall M&A success or failure is easy to overlook. The reality is that there are just as many strategy-related failure factors.
The proposed $4.7 billion takeover of Smithfield Foods by China’s Shuanghui International Holdings raises important questions for US policy makers regarding foreign takeovers: 1. Should food and agriculture be regarded as a strategic industry for which some level of ownership control matters?
Senior executive teams consistently underestimate the time and energy required to identify, assess, and address the many decisions that arise when two complex organizations combine in a merger or acquisition. More than a few CEOs have done the glamour work of negotiating a deal and thereupon handed off the dirty work of meshing structures, systems, and procedures to operations managers.
“Unfortunately for most companies, as statistics bear out, the vast majority of mergers just don’t go as planned. In fact, most mergers are driven by the need for growth, but at the expense of shareholder value.” The new CEO of a Fortune 500 company leaned back in his chair and astutely offered this to his new management team, “Well, I’m convinced that merger integration
Culture clash in a merger or acquisition is a lot like breathing. You don't notice you’re breathing, you just do it. You may be aware of your breathing now, because I have raised it to your attention. If someone were to approach you from behind, cup their hands firmly around your mouth and nostrils, and threaten your ability to breathe, then you would certainly pay attention to breathing. The same holds true for culture in a corporate combination. People don't