What makes an acquisition successful?

A survey conducted earlier this year by Deloitte in the USA of corporate and private equity executives ranked effective integration as the single most important factor leading to a successful transaction (23% of respondents).

Integrating two businesses after an acquisition is often more challenging than bringing the deal to fruition. Many acquisitions fail to add value, or can destroy it, because the purchaser is not properly prepared for “what happens next”.  Achieving completion may often feel like the end point has been reached – but in fact what it really means is that you are only on the start line.

It is essential to prepare for integration well ahead of completion. This means identifying urgent tasks that should be set out in a detailed action plan and set in motion before the ink is dry on the contract. The first 100 days after completion are critical. This is the formative period during which you can accomplish early wins, while laying firm foundations for the future. 

There may be cultural differences between the businesses which will need to be overcome. It is important to keep your existing team motivated, while bringing in new people who may be used to a different way of doing things. Personal tensions, uncertainties and misunderstandings can lead to lost productivity.

Clear communications with all stakeholders must be a key part of the integration process. Customers, employees, investors, suppliers, and even, perhaps, the local community need to understand what the acquisition means for them.

The importance of sound leadership at all levels cannot be overstated. Decide well ahead of completion on key management positions and who is going to fill them. An effective integration plan must set out clear responsibilities and lines of reporting that are universally understood and will be implemented.

The Deloitte survey ranked other factors which the respondents considered to be important in achieving a successful transaction in order as follows; economic certainty (19% of respondents), accurately valuing a target (18% of respondents), stable regulatory and legislative environment (15% of respondents), proper target identification (14% of respondents) and sound due diligence process (11% of respondents).

The corporate finance team at MHA Moore and Smalley has a wealth of experience of advising on transactions of all sizes in a wide range of sectors. If you would like to discuss this blog in more detail, please contact Paul Bennett from our Corporate Finance team on 01772 821021.