Disappointed with the profitability of your company since its last acquisition? Worried that the next acquisition or merger will have a similar impact? You are not alone! Studies have shown that mergers and acquisitions are a risky business. Although many M&A advisors charge a large fee each year, almost all major reviews of companies that complete M&A transactions indicate that most of these transactions fail to deliver on the promised financial results. As with all other investments, the biggest risks produce the biggest results - whether they are good or bad. One way to increase odds is to study the methods of the most successful mergers and acquisitions companies.
As an industry executive, Ive has encountered merger and acquisition challenges many times in my career. I also recently interviewed many C-level executives from some of the world's largest and most successful companies from multiple industries. I also conducted an Internet-based survey of senior executives with intensive M&A experience. Seven award-winning features emerged from a handful of truly successful M&A companies:
Feature #1: Successful companies follow the path of general acquisitions and mergers. from
First, they did meaningful strategic planning. This approach can determine acquisition targets that are a good strategic fit for the company, not just opportunities to scale up. Second, despite their due diligence work, they still performed well. Their due diligence is different from those who perform poorly because they delve into the business process and information systems capabilities and capabilities in the acquisition target to ensure proper valuation and strategic fit. Third, they negotiate the terms and conditions of the transaction and avoid paying more. They achieve this by ensuring that management is not obsessed with the target company. Fourth, they plan to integrate after the merger or after the acquisition. The program includes a comprehensive communication plan, consistency of goals and performance metrics, and integration of processes and systems. Fifth, in the end, after the transaction is completed, the most successful companies are constantly implementing the planned business assimilation and integration activities. Mergers and acquisitions require detailed planning, strict management and active implementation to achieve success.
Feature #2: Successful companies use plans or projects to perform integrations, as well as basic project management techniques to manage each plan. from
Every company, including your company, has a unique combination of strengths and weaknesses and a market-oriented strategy. The combination of these factors determines what specific initiatives your company must take to absorb new business units. In some cases, the most pressing needs will revolve around the rationalization of staffing, facilities and capital equipment. In other cases, achieving the versatility of information systems to achieve cross-selling and brand reshaping will be paramount. Regardless of the outcome of the merger, your company must effectively lead these programs through a formal program management structure. Formally structured and well-managed programs are a powerful feature of the most successful M&A companies. Formal planning management requires elements such as detailed project plans, discrete milestones, clear performance metrics, assigned responsibilities, risk management and change management processes. Program-based integration based on sound market strategies will increase the chances of success in M&A performance.
Feature #3: Successful companies give meaningful attention to the matching of culture, organization, and human resources matters [such as management retention]. from
If your company is acquired or merged, you already know that the different cultures of the companies involved always make the situation challenging. In a hostile takeover, it can prove to be devastating. Employees often find that behaviors previously rewarded by the company sometimes lead to downgrades or dismissals. Performance standards change and people who measure performance change. When this happens, the management of the acquired company and many employees are threatened, defensive and resentful. The loss of key leadership during a critical transition period can undermine the transaction, even if the entire transaction remains the same, the resulting organizational instability can greatly deplete the energy and time of the remaining managers, allowing new companies to spend more time Expected financial performance goals. Some M&A advisors report that as many as 72% of key management personnel will travel to the gates within three years of the acquisition or merger. Almost all successful Merger and Acuition companies have incorporated formal cultural management structures into their integration plans. Some even adopted specific performance measures to monitor the success of a culture of integration after a formal public merger or acquisition announcement. The details of human resources from communication to compensation are the success or failure of mergers and acquisitions.
Feature #4: Successful companies ensure that acquisitions are an integral part of their overall business strategy. from
Are some of your company's acquisitions inappropriate for other businesses? In response to my recent survey of senior executives with extensive M&A engagement, the goal of the acquisition is that the good strategic fit is the third most critical issue for M&A success. The strategic fit follows the tightly coupled financial market [income, market share] between the companies involved in the technology, the technology, the R&D direction. This also means that there is a series of real and quantifiable synergistic opportunities between the two companies. The best M&A performers maintain strong strategic plans, market-oriented strategies, internal operations strategies, specific performance targets, and performance metrics from top to bottom through corporate links. They incorporate the alignment of these elements of the acquisition target into their transaction's integration plan and trigger them as soon as the transaction is completed. An effective plan is an essential element of a successful business. In the case of mergers and acquisitions, it must also be the basis for every major decision.
Feature #5: A successful company has full-time resources and a strong executive responsibility for the success of the acquisition. from
Does your company assign a full-time team to an acquisition, or more part-time work for those who do their daily work? The pressure on the day-to-day job responsibilities of key staff makes it difficult for them to focus on part-time work related to M&A activities. Assigning skilled full-time resources to these tasks as early as possible during the due diligence phase of the acquisition or merger process is often critical to success. GE, arguably one of the best acquirers in the industry [of course one of the most prolific acquirers], recognizes that management experience has had a huge impact on the success of their efforts, so it was decided a few years ago to integrate Management design is a full-time job for their company. Research on GE and others has shown that companies that allocate full-time teams have better track records of mergers and acquisitions.
Feature #6: Successful companies have independent integration activities goals and reliable short-term financial goals that are quantitative. from
Have you announced specific performance targets and are well known in your company's last acquisition? While goals such as "increase in a year" are sufficient, they must be broken down into a series of initiatives and accompaniment measures to make a difference. The best companies not only need to understand the quantitative goals of the top-level goals, but also understand what specific actions will be taken, through what and when to achieve the desired results. The detailed project plan revolves around a defined set of plans described in Feature #2 above. Initiatives can refer to revenue growth, market share growth, or reduced operating costs. They can involve a variety of actions, such as establishing strategic partnerships for marketing or distribution, revolving around cross-selling or brand reshaping, facility rationalization, new R&D initiatives, organizational restructuring, and information systems upgrades. The most successful companies are through different initiatives to achieve quantitative goals. Achieving these independent goals enables newly merged companies to achieve specific financial goals at specified times. The most successful mergers and acquisitions companies are those that most independently define what success means.
Feature #7: Successful companies are firmly committed to incorporating newly acquired business entities into common business processes and information systems as early as possible. from
A C-level executive I interviewed [this is a financial services executive] prepared for my book: " We have three top priorities in these transactions: gaining market share, increasing assets, and reducing operating costs based on the proportion of assets we manage. Incorporating the acquired entities into a common process and system is strategic for us to achieve the third goal. And the efficiency of our staff training. A company like ours is...
Orignal From: Seven characteristics of the most successful M&A companies
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