Can Today’s Business Leaders Choreograph M&A Success?

With increasingly diverse and multigenerational workforces, and most industries undergoing some form of digital disruption, today’s business leaders find it more prudent to buy than to build talent and capabilities they need to join the ranks of the disruptors. By definition, that means many of today’s deals require integrating a completely different type of organization with capabilities far outside the acquirer’s core.

Dealmakers are more ambitious than ever before. They’re using mergers and acquisitions not only to improve the bottom line, but to stretch their business, adding new and often unfamiliar capabilities. Reaching into unknown territory for growth is, of course, riskier than combining organizations that have a lot in common.

PwC’s 2017 M&A Integration Survey found that companies are getting better at achieving certain goals, but they’re still struggling to reach others — namely, because their expectations are changing. The report explores in detail the challenges that today’s dealmakers are facing, as well as a sneak peek into what dealmakers are getting right about integration and where they need to improve.

Redefining M&A Success

Companies are achieving greater financial and operational success with their deals, but strategic success is getting harder to come by. Transformational deals continue to increase, based on 54 percent of responses, which is a direct correlation to the decreasing percentage of respondents who report “deal success.”

Financial results and synergies captured are improving, based on respondents who reported “very favorable” or “favorable” results for profitability (82 percent), cash flow (83 percent), revenue capture (83 percent) and cost capture (90 percent). In addition, the speed of deal integration has improved, with 88 percent of respondents reporting that the time to achieve leadership alignment took six months or less.

Top Integration Challenges

Integration across functions and geographies remains the most difficult of challenges for business leaders to overcome during a deal. People integration also remains a big challenge, with a decrease in respondents (45 percent) reporting “significant success” in retention; and very few across the board reporting favorable results when it comes to employee morale (31 percent) and understanding (33 percent).

Gregg Nahass is a partner with PwC, and principal author of its 2017 M&A Integration Survey released last month. PwC’s tri-annual M&A Integration Survey, now in its 20th year, has tracked the integration strengths and weaknesses of public-company M&A since 1997.

Transformational Deals on the Rise

The shift in deal type from absorption to transformational deals continues to increase, as companies look at new markets, channels, and products as a way to fuel much-sought-after growth.

The Integration Team Is Getting to Work Earlier

Survey results suggest a higher probability of achieving deal goals when planning starts early and integration is executed rapidly, as respondents report at what point their integration team got involved.

Dedicating Resources to Cross-Functional Areas Can Increase Deal Success

Companies should dedicate resources to cross-functional areas to choreograph efforts across functions and geographies.

Deal-Performance Indicators Are Important to Track Deal Success

To improve deal success, companies should stay focused on the value drivers behind the deal, and have a disciplined approach to delivering synergies and other integration metrics over the long-term. Like the old adage says: If it doesn’t get measured, it won’t get done.

Source: PwC’s 2017 M&A Integration Survey