Develop an Acquisition Strategy That Delivers Results

The COVID-19 pandemic has led to many companies becoming financially distressed and it is expected that there will be opportunities for better capitalized companies to acquire or consolidate assets once the economy begins to recover. Organizations that typically do not engage in M&A work may see the benefits of seizing good buying opportunities and the potential to realize synergies and expand operations.

Research from McKinsey & Company shows more than 70 percent of M&A deals ultimately destroy shareholder value. Why? Organizations do not build plans for the transaction upfront and lack the internal skillset to create step-by-step integration plans.

If your organization is considering M&A activity, here are some questions to ask yourself to see if you’re prepared for what comes next.

Do we have dedicated integration management resources?

Organizations will acquire another company and delegate the integration planning to the operations team. It’s important to involve the operations team in this process, but downloading all the responsibility means something is going to fall down the priority list. In our experience, running the existing operations often takes precedence. This approach risks losing productivity or an unfocused integration delivery, which strays from the strategic timelines and objectives.

What is our past experience with acquisition and integration? Were we successful?

If this is your first acquisition, you’re heading into uncharted territory. Given the investment you’re making, is it prudent to try to figure this out as you go along? Like trying anything new, there are going to be questions you wish you asked yourself or things you knew at the beginning.

If you’ve done acquisitions before, how did the process work? Some organizations complete acquisitions and integrations but do not debrief on the experience and can’t answer this question. The team quickly focuses on shorter-term priorities instead of creating a better strategy for a future acquisition.

How are we quantifying the objectives of your acquisition?

You’ve made a deal for a reason. Let’s back your logic with results. Organizations often may not have the internal structure and resources to manage a successful acquisition through the initial phases and stabilization period until the new assets are ready to be turned over to operations. In the short-term, a lack of resources and information means you could be missing opportunities to realize synergies. In the long-term, the gap in data could lead you to make more acquisitions that will not deliver your intended results.

These are difficult questions to answer. Acquiring and integrating another company is a high-stakes process and using third-party expertise can unlock the maximum value of the transaction. If you’re considering an acquisition and want support in developing your plan, our team can help.

Contact Graeme Wedge, Senior Manager, Consulting, at 416.260.3516 or [email protected]