Maximizing the chances of
Mergers & Acquisitions
How can you ensure corporate transactions deliver their full value?
There are many reasons why organizations choose to go through a corporate transaction or similar transformation process. For example, they may be seeking to:
- Drive innovative new products and services
- Reach new markets for growth
- Create a new or enhanced customer experience
- Improve cost position and efficiency through scale
- Deliver growth through a combined key account strategy
But while such transformations can offer substantial business benefits, the unfortunate reality is that they rarely do, with a remarkable 70 to 90 per cent of corporate transactions and mergers and acquisitions failing to deliver their full value.
Why do corporate transactions so often fail?
One of the key reasons for the failure of corporate transactions is what we call “the deal paradox”: that is, the fact that deal-makers assign value to tangible and intangible assets in inverse proportion to how significant they are in creating value for the business.
In most cases, 90% of value pre-deal will be determined by tangible assets such as market share, EBITDA, CARG, pension contributions, and technology, while only 10% will be based on intangibles such as organization structure, culture, brand loyalty and leadership. Post-deal, however, the success of the transaction will be 90% dependent on the activation of intangible assets and only 10% on the activation of tangible ones.
Other key factors that can hinder success post-deal include:
- Culture clash.
- Inability of employees to collaborate.
- Leaders who do not provide effective leadership.
- Failure to retain the best talent.
- Cost synergy that removes wrong roles or people.
- People who are not motivated or enabled to do their work well.
- Organization becomes internally focused rather than customer-focused.