M&A process - build bridges, not walls

While the M&A landscape has been impacted by the current crisis, and many deals are on hold, it’s more important than ever to achieve results on the essential transactions that can’t wait. Moreover, even before we fully know what the “new normal” after the crisis will look like, we may need to be able to acquire new technology or business capabilities that are critical for survival. New opportunities may also emerge, and we need to be well prepared to make the most of them.

Taru Weckroth

30.6.2020

We’ve already discussed the characteristics of successful M&As, and we’ve already concluded that pre-deal characteristics can only explain M&A performance to a limited extent. Since the obvious M&A target is not only to close a successful deal, but to achieve the planned synergies and business benefits, we need to go deeper into the acquisition process.

The process that connects pre-deal to M&A outcome can be described as follows:

Note the big gaping pitfall in the middle. It seems obvious that - in order to realize the benefits of the acquisition - this gap should not exist, and the momentum of the original strategy must be maintained. Yet in practice we see this much too often. The process itself is the problem – and therefore the solution, too.

Integration is too often seen as a completely separate process from the earlier stages of the deal. This is rooted in the practical fact that different skills are needed at different stages, and team composition changes. When the key people from the due diligence process leave, and new team members are recruited for the specific roles required in the integration process, critical information may be lost, and worse – direction and purpose may be lost as well. Fortunately, closing the gap requires nothing more complicated than a bit of awareness, and attention to practical knowledge transfer.

There should be both push and pull for knowledge transfer. It should be clear to the original deal team that they have not completed the acquisition when the deal is closed but are passing along an unfinished deal to the integration team. The integration team will eventually bring home the benefits, and they need to realize that their work is not an isolated project. Their direction and purpose have already been set, and that all the work that is done should aim at realizing the original strategy.

In practice, we see often that the integration team feels the need to reinvent the purpose of the integration in order to choose the appropriate business and technical solutions for the integrated entity. In my opinion this is a symptom that the intention of the deal team is not clear for the integration team. When the direction is known, the choice of paths to get there should become – if not easy – at least a lot more straightforward.

In other words, acquirers must link their pre-acquisition strategy with an appropriate post-acquisition integration strategy. The ability to build bridges – rather than walls - over the gap between deal preparation and integration is critical in completing a successful M&A integration.