M&A is Back, But Hitting the Deal-Thesis May Be Harder Than Ever

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With the uptick in M&A, the M and A Leadership Council believes that it is more important than ever to prioritize your deal objectives. Acquiring executives cannot afford to do the deal without the assurance that they can execute the anticipated deal synergies.

Skilled acquirers know that achieving consistent deal success means thinking about M&A as an end-to-end business process for growth vs. a one-off transaction.

Mergers and acquisitions have come roaring back during August and September. With a continued low-interest-rate environment and strong stock market performance, combined with strong balance sheets among many acquirers, the market has sprung forward from essentially non-existent in Q2 2021 – to a premium Seller’s market in Q4. The question that remains is will companies be able to capitalize on this surge and effectively deliver value to their stockholders?

Sectors such as remote technologies, fintech, and healthcare are experiencing intense Buyer interest, as are those companies positively impacted by the pandemic, or those that have pressure-tested their downside scenarios and come through the COVID-19 storm in much better shape than initially anticipated.

As a result, purchase premiums are on the upswing, making hitting the original synergy targets exceptionally challenging, with much less margin for error. Two additional present conditions further challenge the acquirer’s ability to hit the planned deal-thesis objectives. First, as a response to the early stages of the pandemic, many acquirers reassigned, furloughed, or laid off key M&A team members, corporate development staff, or internal integration leaders and program managers – potentially limiting their ability to relaunch effective execution of M&A activities quickly. Second, for large, experienced, active acquirers, the current environment represents a “once in a generation” restructure of market share and industry landscape leading to a much higher level of deal volume than normal, which may lead to further execution challenges and value erosion impacting the ability to achieve the deal-thesis objectives.

Six Key Requirements to Ensure Hitting Deal Objectives

“Skilled acquirers know that achieving consistent deal success means thinking about M&A as an end-to-end business process for growth vs. a one-off transaction,” according to Mark Herndon, Chairman of the M&A Leadership Council, whose organization has trained over 4,000 executives from more than 700 companies globally in the art and science of M&A. Herndon continues, “From research and practical experience, we have identified six fundamental elements of internal capability that must be built and executed by acquirers to increase the probability of success with each new deal." These include:

1.    M&A Lifecycle Framework. Start with the end-to-end roadmap, defining the phases, steps, decisions, and deliverables clearly describing what happens, by whom, and when for your typical deal types.
2.    Leadership, Governance, Resources, and Budget. Identify in advance the leadership roles, escalation/decision processes, resourcing, and costs required to execute quickly and effectively. Without good M&A governance, even the best deals will struggle.
3.    Enterprise-wide M&A Program Management and Cross-Functional Alignment. M&A is a top-down, strategy-led effort that requires superb enterprise and cross-functional planning, coordination, communication, and change management through a disciplined process.
4.    Functional M&A Capability and Readiness. Each function should be equipped in advance with their respective roles, resources, tools, and process.
5.    M&A Software Solutions. While specialized M&A software is not a strict requirement, it can help standardize, automate, and accelerate due diligence and integration – but caution is in order. Like any software implementation, build the process first, and implement it with a great deal of planning and user support to avoid disaster.
6.    M&A Education and Training. M&A success is ultimately based on both knowledge and experience. Academic understanding is not enough. It takes practical insight, with tried and true “what’s works” in the heat-of-battle expertise. Unfortunately, research indicates that the majority of acquirers fail to provide appropriate training to key M&A team members, thus exposing themselves to unnecessary risks and increasing the likelihood of deal failure.

Herndon continues, “That’s what we work hard to deliver for each M&A Leadership Council webinar and training program. Whether online or in-person – the M&A Leadership Council is known for providing immediately applicable insights from outstanding M&A practitioners in multiple disciplines. Even highly experienced acquirers readily admit that M&A needs to be executed more effectively. With the amount of capital being deployed, the risks being taken, and the historic opportunity to reshape market share -- can executives afford not to have their team in place and equipped with everything they need to execute?

About M&A Leadership Council
The M&A Leadership Council is an educational consortium of global professional service firms, experts, and corporate practitioners in the art and science of mergers, acquisitions, divestitures, and joint ventures. Over the past ten years, the M&A Leadership Council and its partner organizations have trained over 4,000 executives, representing over 700 best-in-class companies from every industry sector in the art and science of MA&D. The M&A Leadership Council actively supports corporate M&A practitioners through a variety of proprietary research initiatives and publications, online and onsite training programs, best practices; and, an industry-first certification for corporate M&A practitioners, the Certified M&A Specialist (CMAS®).

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April Dumas
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