The secrets of successful M&As

2007

Integrating a new acquisition into your business is one of the most daunting challenges any management team can take on, but getting it right is actually quite simple – you just need to learn from your mistakes.

Yet according to research from the Conference Board, too few management teams spend the time to learn what works and what doesn't when it comes to integrating new businesses, with the result that too many M&As fail to deliver their promised value.

The U.S study echoes a European poll published in March by consultancy Hay Group which suggested that more than nine out of 10 corporate mergers and acquisitions fall short of their objectives because business leaders too often got bogged down with finance and technology issues and fail to spend enough time integrating corporate cultures and management styles.

But management teams that put in place a set, formal process for integrating new acquisitions are much more likely to reap value from their M&As, the Conference Board argue.

Their survey of 86 mergers and acquisitions executives found that documenting and sharing M&A experiences allowed those employees responsible for integrating future acquisitions to learn what worked and what did not.

This simple approach is especially beneficial to "serial acquirers", or companies that pursued planned, continual growth through M&As and many of these are developing specific management tools help them improve their integration processes.

Formalising M&A integration practices also offers companies several other advantages, the report says. Most notably, having clear objectives and processes for M&A integration can help companies communicate their mission effectively, and defuse the political concerns that inevitably arise.

In fact, having a well-oiled "integration engine" makes the whole process more dynamic and encourages more commitment to the objectives and goals of the particular integration.

But nevertheless, the degree of similarity between the acquirer and the target firm remains an absolutely key issue in any successful M&A, with more than nine out of 10 of the executives polled reporting that their acquisition targets were either "completely" or "to a high degree" from the same industry.

"The further you move away from your own business, the more likely there will be an exponential increase in problems," the report says.

And the same is true of geographical proximity, with cross-cultural issues likely to play a larger role than corporate cultural issues when trying to integrate a target acquisition in a different geography.

Among its recommendations, the report suggests capturing lessons and models that could be used to train those with specific integration tasks (such as logistics, customers, distribution and so on) and using project management techniques to ensure there were clear reporting deadlines to senior executive management.

Getting started early is also a good idea, so ensuring that integration professionals are leading the due diligence process.

And much as in the Hay Group report, the Conference Board warn that integrating corporate cultures, merging IT systems and building solid management teams continue to represent the most significant roadblocks to successful mergers.

"Cultural distinctions in the target firm can be diagnosed through surveys and focus groups and the results can be used to develop action plans to reduce differences," the report stresses.

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John Chambers, Cisco CEO, said of M&As, 'The marriage of equals never works.'

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