Author: Carlos Keener

I’ve just left the 5th Merger Integration forum held by Thought Leader Global in Amsterdam.  Over the past 10 years or so I've been to many such conferences - both by TLG and others - and although the economic downturn has seen fewer conferences run, I was interested to note some differences emerging from what I'd have experienced just a couple of years ago.

Congratulations to Glencore on finally completing their long-running merger with Xstrata; we wish Ivan Glasenberg and his team the best of luck. It was especially encouraging to see his comments as reported in the Wall Street Journal earlier today (3 May) recognising that deals only add value post-close, so celebrations are by no means in order yet – the hard work is only just beginning. 

Everyone knows that lawyers – whether in-house, external or a combination of both – are key to successfully conducting M&A. Less well recognised is the positive role they can have in helping identify, understand and tackle integration and other post-close issues. This applies as much to in-house legal teams as it does to the supporting law firms, both of whom tend in my view to stay too much within their comfort zone. The value of lawyers across the deal spectrum can come not so much from what they do, as what they see along the way. Consider the following typical areas of legal M&A support pre-close:

From the moment a deal is announced ‘building credibility and trust’ with stakeholders is a key objective for the communications effort.   A key factor in building credibility is being consistent in the messages you give - ‘boringly consistent’ as a former senior exec client proudly once called it.  He understood the power of the well honed, repeated and repeatable message and as a result the organisation ‘got’ the change programme he was leading.

Today saw the announcement of a major acquisition in the scientific equipment space as Life Technologies is sold for $13.6B to Thermo Fisher Scientific. Encouraging news to see larger deals taking place in the high-tech sector; but makes me wonder: Are we going to return to the ‘good old bad old days’ of high-profile mega-deals followed by integration problems, management mud-slinging (see HP Autonomy) and ultimate value destruction; or is there a chance that we might be seeing some wiser, clearer thinking?

Last week two blistering reports came out on the subject of supposed wrong doing, incompetence and poor leadership in banks. First was Anthony Salz’s report on Barclays culture prompted by the bank’s attempt to rig Libor and yesterday’s Parliamentary Commission on Banking Standards  pinpointing three senior executives once at the top of HBOS with indications that these people might never be able to work in financial services again. In addition, RBS investors launched a class action lawsuit against the bank and former directors including the ex CEO Fred Goodwin. They are looking for £4bn in compensation. Not surprisingly all these projects were managed by those outside the organisations which does not say much for the degree of internal self discipline and self analysis which their existing culture engenders.

I try to follow the various recent deals within the US airline sector, and amongst the predictable post-close challenges around union negotiations, booking systems integration etc, this note really caught my eye: Diana Moss, VP of the American Antitrust Institute (AAI) recently testified in the US Airways–American Airlines merger review, voicing her concerns about the deal. Alongside the predictable concerns related to market share and the potential to exert anti-competitive behaviour, out came this zinger: “An increasingly important factor in the efficiencies debate is post-merger integration".

Distressed businesses have usually bagged all the low-hanging fruit in their previous attempts to save their business. This leaves the hard work to the acquirer. Picking up the pieces may be easy; getting them back into a working state is a challenge. That’s why they're cheap.  Unless the value centres around untapped capabilities only you can exploit, the safer guide is that the lower the deal price on offer, the harder it may be, ultimately, to deliver results with the acquisition. This is the final part of our three-part series

[caption id="attachment_285" align="alignleft" width="58"]Coordination groups M&A Co-ordination - all important![/caption] In large businesses, getting an acquisition from opportunity to signature is one of those few key activities that demands seamless collaboration between Corporate and Business Unit entities. In many cases one group pays for the deal, while the other lives with the results. While this may seem a logical split of roles, it can result in a number of misaligned priorities and other systemic flaws in the pre-close process: Business Units not fully understanding the deal rationale, making it hard for them to truly get behind the delivery of the benefits; Corporate Strategy or M&A groups building synergy models and assumptions insufficiently underpinned by operational realities; lack of accountability between Corporate and BUs over execution, leading to finger-pointing if things go wrong.