M&A programs are crucial for an enterprise. Many M&A actually fail because of inappropriate preparation. They are an economic adventure but also a human adventure, in which each member of the enterprise has a part to play. CEO Worldwide offers enterprises (which are willing to succeed) the experience of top managers, who have already succeeded in setting up several M&A programs. Experience is a key factor in this field.

A) The Myth

Conventional wisdom is that most merger and acquisition (M&A) transactions fail. Or put another way, only about 20% of all mergers really succeed. Yet M&A activity is prevalent. Why? Because the reality is that M&A does succeed on average. M&A clearly pays for shareholders of target firms, especially if they are shareholders of private firms acquired by public firms. And most studies of targets and buyers combined indicate that these transactions create net value.

B) Initiation of an M&A Program

Successful companies develop critical core competencies that drive their competitive strategy. In order to increase the chance of success with a M&A program, successful companies must also develop core competencies that make them superior acquirers, something that is difficult to do when each acquisition is considered a unique event. When companies announce they are undertaking a series of acquisitions in pursuit of some strategic objective, generally their share price rises significantly. The stock market’s systematic positive response to such announcements suggests that most corporate M&A programs tend to create value over the long haul.

3) The Three Key Factors to a Successful M&A Program

Strategy

All else being equal, acquisitions of companies in related fields (“focusing acquisitions”) is the most likely path to the discovery and exploitation of synergies and generally provides a better return than an acquisition strategy that does unrelated diversification. Furthermore, focusing acquisitions should only occur when it advances the overall strategy of the company in compelling ways. It is essential to ensure the transaction is in alignment with the company strategy. Always question the strategic rationale of each transaction. If the strategic rationale is wrong it doesn’t matter how well the deal is executed or integrated, it is still a bad deal. But if the strategic rationale is right you still can fix a bad deal or a bad integration. Having a sound strategic rationale defines the purpose of a transaction. There should be absolute clarity within the organization on the purpose of the acquisition and why it’s important. Not only is this critical to motivating employees and shareholders, but an acquisition justification can serve as a beacon to point the way during problems, complexity, and confusion that inevitably occur during integration.

Sponsorship

To ensure success of an acquisition, the deal must be sponsored by the head of the business unit (the “BU”). The CEO or the deal team can manage the transaction but if it doesn’t have a sponsor after the transaction closes to ensure that the details of a successful merger are addressed, the transaction will fail to meet expectations. And the BU head must be accountable and rewarded for performance. It is essential to have a stakeholder that is willing to spend the political capital to make sure the transaction is a success. If it is a new area for the company without an established BU head then the CEO must appoint a BU head, generally from the acquired company. Using an earn-out structure in this circumstance can help ensure the BU head from the acquired company is working for the good of the combined company. Furthermore, the BU head must have the bandwidth to put in the required time and effort as making synergies happen is not without cost – time spent on coordination and interaction to realize synergies, additional training and relocation costs, and additional travel time.

Integration

It is easy to lose one’s focus when the deal is closed but that is when the work begins. You must have someone, a program manager, who can stay attentive to the details. Start preparing for the unexpected. Laying out the first integration moves in advance frees up management time to deal with the issues and problems that could not have been anticipated in advance. Probably the most important of these items is to ensure that the first payroll does not have any problems. There is no better way to signal to employees of the acquired company that you don’t care about them than to mess up their first paycheck. Each integration plan must address the following four basic principles:

1. Accountability – individuals must be made accountable to oversee and direct the integration effort

2. Specific action steps must be created – a specific time frame for completion of integration must be created and followed

3. Communication – internal and external procedures and processes must be addressed

4. Measuring success – for each acquisition the company should establish benchmarks of performance with provisions for evaluation, control and corrective action

D) To Conclude: Nothing Replace Experience

If there are any basic principles to succeed in M&A, experience is definitely the key factor (to success). There are so many variables to master that a theoretical or purely economic vision cannot resolve the different problems. CEO Worldwide provides a vast number of top managers who have succeeded in achieving M&A. They can intervene in an autonomous way or assist you directly in this vital step for your enterprise. For a temporary mission or for a permanent job, they will allow you to take advantage of your business opportunities in the best possible way.

About the author: A senior executive officer and industry expert in corporate acquisition and business development with the ability to provide complex strategic planning and M&A execution for accelerated corporate growth. Excellent ability to conduct thorough due diligence requirements coupled with keen business savvy to identify emerging opportunities.

Click to view Michael’s short bio

Companies and organizations globally are striving to increase profit and shareholder value in times of phenomenal socio-economic change and political financial upheaval. Business is never easy and when times are tough the consensus often is to focus on core competencies, ruthlessly cutting costs, doing more with less. Perspectives can be reduced in recessionary periods as companies focus to survive. However, perspectives, whilst powerful are culturally determined and open to influence, redirection and positive change. Business management in all companies must embrace the wider perspective to benefit from the compelling value available across the socio-technical horizon.

So what are the wider perspectives?

There is little doubt that consumers everywhere are becoming much more environmentally sensitive and vocal. The issues around C02 Footprint, fresh water, energy, pollution, waste, health, resource depletion, climate change, poverty, the Green Movement, etc., affect every citizen, company and organization on this planet. We are much more interconnected that we ever realized and the success of companies today and in the future will depend on their perspectives and actions in embracing major problems that impact all citizens.

Therefore a company / organisation strategy ideally, regardless of size, should be in alignment with goals that identify positively with issues facing the community, country and citizens globally. Companies must act responsibly and be seen to care.

How do companies adopt the wider perspective whilst maintaining profit levels and market share?

The higher vision gear-change for companies can be much easier to implement and offer scope for multiple profits, new revenue channels and cost saving opportunities. The focus should be on people first and emerging technology second.

People First

In times of rapid change and economic upheaval employees can be stressed and vulnerable. Hence companies need to embrace their teams effectively with better communication (more flat line structures) and where necessary, add esteem-morale building strategies. Military type command structures offer zero value in 21st century businesses. Companies need to have all employees (team members) on board by consensus, mutual appreciation and respect – and this can only come naturally by being sympathetic to the needs and aspirations of staff in the first place.

Companies that are in sync with employee goals are more in sync with community values and wider issues globally that incorporate major issues like Climate Change and Sustainability. Take Google for example? Aware of the massive energy requirements from servers and internet users around the globe, Google are actively looking at ways to source alternative and sustainable energy. They see the wider perspective.

When everyone in an organisation pulls together amazing productivity values and ideas are created.

Emerging Technology

Emerging technologies like nano-bio-technologies offer remarkable value in helping companies to 1, save revenue, and 2, build brand value via positive reputation.

How can emerging technology save companies money?

Every business on the planet can further reduce operating costs. By starting small within the office, factory, car or town, nano coatings alone, for example, offer solutions that:

1. reduce water usage
2. remove aggressive cleaning chemicals
3. stop environmental depreciation and reduce carbon footprint
4. cut emissions and pollutants
5. enhance energy efficiency, minimizing waste
6. reduce mechanical wear and material consumption
7. open doors for new cleaner products and revenue
8. improve health, food production, resources

By implementing Clean Tech strategies companies save revenue

These “green” technologies offer additional compelling value however because there usage actually helps address sustainability issues & protects our environment.

A company or organisation with environmental and sustainable goals in addition to its core activity attracts a positive energy ethos that can drive real Brand value forward. Costs and risks are reduced. Employees, supply chains and clients can be galvanised into collective positive action. We are all in this together philosophy. The triple profit line of profit, community value and environmental trust pushes companies and organisations into a much higher league visually and operationally, with humility and respect for humanity, society and nature, being drivers incorporating the wider real perspective. The win-win-win principle has never being so apt and necessary.

Many companies and organisations are aware of the benefits of going green. However many are still unaware of how nano-smart fluids can turn them into profitable and responsible operations overnight, simply by adopting incremental changes, using nano technology and related emerging technology.

View Dermott’s short bio