2015 was the biggest M&A year ever, with some of the highest deal values since 2000. The market is hot. M&A activity has increased in almost every sector of the economy, and there can be great opportunity to be had.
So what will go down as ‘deal of the year’?
There are all sorts of variables that advisors and company executives look for when making decisions about whether or not to do a deal - market opportunity, barriers to entry, calibre of the team, competitive advantage, financial performance, culture fit, and so on. While a thorough job is usually done, it’s estimated only half of all mergers and acquisitions meet the initial strategic and financial expectations. Why? Often, the hardest work actually comes after the “deal” is done. The most successful deals will end up being the ones that manage the integration or post-acquisition phase really well, and most importantly, focus on the people.
I’ve been part of the team managing a number of small to mid-size acquisitions in my career. In each of those, I’ve witnessed a number of challenges post announcement - founder/entrepreneur transitions, implications of earn-outs, culture fit, cross border/cross-continent communications, and branding and operational challenges. Some of these can’t necessarily be avoided and/or completely understood during the due diligence process. But, what happens after the deal is done is vitally important to the success of the deal.
You can’t automatically assume that things will naturally fall into place. With M&A, comes of course opportunities for synergy and economies of scale. But, for the people who are most important to the businesses impacted, the employees, these two things often translate to uncertainty. Ongoing communication to keep the team focused is critical, as well as ensuring you get the people part right – especially regarding the company leaders.
Hopefully the management team is already strong, but if not, the CEO, with support of his/her Board, will need to make some decisions in order to get the right leadership team in place. This, overtime, is a large indicator of driving success. Having a strong integration/project management team is equally important. The management team will also need to spend a lot of time communicating and perhaps more importantly, listening – in order to work out what works, and what needs to change. Being clear about the strategy, as well as defining any new or revised vision, values and goals as well as culture norms, particularly in combined organisations, is essential.
So, the 'deal of the year' will be the one that, not long after the M&A bankers have left, sees a highly motivated and fully engaged team of people come together, and then execute a clearly articulated strategy together.
Ashley Walker is Founder & CEO at Culture Engineers, and has managed communications and change through several mergers and acquisitions (and subsequent integrations).