Numerous studies conducted over various points in time have shown that the majority of M&A investments fail to create value for the acquiring company, yet the rate and transaction value size continue to grow. What can management do to ensure they maximize their chances of success?

Typical M&A Process:

In many situations, the bulk of an acquiring company’s resources and focus is on the approach and execution, yet much of the value comes from the proper planning, strategy and targeting.  Companies that develop robust and holistic acquisition capabilities and emphasize all stages of the M&A process, have a greater likelihood of making successful acquisitions.

Developing a successful M&A capability requires strategic, tactical and behavioral changes to avoid “the winner’s curse”. 

• Accept that the corporate objective is value maximization and avoid the temptation to chase growth for growth’s sake in an effort to build an empire. Focus on a sound and prudent growth strategy that evaluates all alternatives including organic growth and collaborative growth.
  
  
• Implement a robust analytical approach for evaluating opportunities for growth and the ability to distinguish between value creation for the buyer and over paying, resulting in all the value creation to be transferred to the seller. Many times traditional analysis and valuation approaches fail to adequately distinguish between the two.
  
  
• Build a library of information based on history inside the company and inside the industry. Understand (for both your company and your competitors) what has drove their actions, what have the consequences been. When acquisitions succeeded, why? When they have failed, why?
  
  
• Continuously monitor targets and changes in expected performance over time, when has the market overreacted (to the up or down side)? How should this change your perception of the company?
  
  
• Actively avoid the mental traps of over confidence and tunnel vision by taking an inside/outside view of the situation and ensure all potential risks, alternatives and potential outcomes are considered. By applying an “investor’s lens” to strategic decisions, management is more likely to make decisions consistent with shareholder value.
  
  
• Ensure that a ruthless process for post merger integration has been developed early in the process, extending well beyond tactics and processes to ensure that the synergies are realized.