Is your next deal destined to succeed or fail before you've even selected a target?

Some companies consistently succeed in M&A while others consistently fail, deal after deal. This year, BTD is taking some time to explore why, and will be presenting our findings at this year’s Merger Integration Management Forum in Amsterdam.

Most M&A and integration professionals know what it takes to deliver long-term value from an acquisition: clear objectives, a programmatic structure to integration, and detailed planning among many others. These factors are crucial in ensuring your next deal is a success.

But how do you make sure all your deals deliver value, consistently?

“We’re now doing several acquisitions each year and need to get better and more consistent in our M&A performance. I know, let’s build a playbook!” We hear this often, and frequently work with our clients to do just that. Helpful as this step can be, it’s nowhere near enough on its own, and usually isn’t the right first step. Worse still, in some cases, a comprehensive, detailed checklist of activities actually lowers your M&A performance. As the saying goes, “Man will go to any length to avoid the real labour of thinking” – junior staff following a playbook to the letter is like assuming your car will take you anywhere, even across an ocean or to the top of Everest. Getting M&A and integration right is less about skills or process, and more about context and experience.

Also key is strong leadership, leadership that demonstrates and insists on the right behaviours by everyone involved: objectivity and balance, personal accountability and a measured pace that avoids deal fever pre-close and ‘proactive agility’ post-close.

But even experienced people, toolkits and strong leadership isn’t enough. All M&A requires the work of dozens of people working in concert across many parts of the business. Our work over 25 years tells us clearly that while individuals can make or break any single acquisition, it’s organisational capability that drives consistent M&A success. Capability is not just about having those right people, tools, leadership and experience. It needs to consider how they all operate together to support or hinder acquisition outcomes: processes, tools, templates, organisational structure, accountabilities and incentives, resourcing (internal and external), skills, competencies, culture, behaviours and governance. And it’s not just about your M&A or integration teams. Business units, functional teams and outside advisers also need to be considered.

Some of the questions our work explores include:

• How do companies really define M&A success? Measuring success is far more complex than it may appear on the surface, and can involve metrics around delivery of deal objectives, revenue growth, cultural assimilation, and staff retention. Each measure offers partial insights but rarely delivers absolute clarity. It also differs deal to deal, and company to company.
• What organisational capabilities are needed to support different acquisition strategies? M&A strategies tend to focus on a desired deal frequency, relative deal size, and deal rationale (scale vs. capability). Having set yourself up for one ‘M&A footprint’ doesn’t mean you're ready when this changes.
• Are clear personal accountabilities enough? Hugely important but very rarely clearly defined. Furthermore, it is only one of four elements of agency, all of which need to be clear and aligned:
  - Accountability (“what I am expected to do”),
  - Authority (“what I am allowed to do”),
  - Incentives (“what I want to do”), and
  - Competency (“what I know how to do”).

We look forward to sharing our findings with you at the Merger Integration Management Forum in September, or later in the year if we don’t see you there. If you’d like to be included in our research into this area, please contact us to discuss.