Systematically pursue additional performance-improvement benefits
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Companies are going down the M&A path in the search for growth and efficiency amid a moderate economy, taking advantage of the availability of inexpensive debt. They believe that the benefits received will be greater than what they can achieve through organic growth. These companies are also under pressure from investors to boost ROI, prompting them to look at new approaches to how they build even more value.
Unfortunately, many companies focus their initial efforts on managing near-term risks and capturing only the opportunities identified during due diligence. These management teams may be overwhelmed by the daily routine of running the business and fail even to meet their pre-deal synergy targets, let alone expanded optimization goals. Those that do succeed are systematic in pursuing additional synergistic benefits during M&A and have a well-defined plan for achieving the combined company’s full potential.
Types of Optimization
Too often, deferred optimization, sometimes called phase 2 integration, never happens. Below are three types of optimization.
Capability-Led: In certain merger situations, there is a key capability—procurement, for example—that’s critical for creating the most value from the deal. Instead of integrating on a broad scale, these acquirers have more to gain by focusing on the key capabilities that will foster the new company’s success.
Full-Potential: Using this approach, companies embark on a broad and accelerated effort to significantly boost the synergies and competitiveness of the combined company. It may be the best path to take when there’s a high degree of operational and functional overlap or a low risk of customer disruption.
Structured: When the merger itself is quite destabilizing for the organization, or when management is dealing with dramatically changing the operating model of both companies, a staged approach often is preferred. It may be the right choice if an acquirer’s initial plans call for operating the acquisition as a separate business unit. However, the deliberate approach comes with a risk: By waiting too long, a company can miss the biggest opportunities.
Our professionals frequently have had extensive experience and leadership roles in various industries, in addition to experience as consultants. They understand the real-world pressures managers often face, the complexities of business environments… as well as the art of the possible.