Study: M&A Success Hinges On Preparation for Post-Deal Integration

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By Yin Wilczek

March 9 — Poor preparation for the post-merger period is one of the main reasons merger and acquisition deals don't achieve their projected benefits, a new report from Deloitte LLP finds.

Survey participants responding to Deloitte's 2015 Integration Report also cited information technology as the functional area most in need of improvement in terms of integration skills and capabilities.

“In this vibrant M&A environment, post-merger integration is a critical factor in achieving deal success,” Deloitte Deputy Chief Executive Officer Tom McGee said in a related release March 4. “The Integration Report provides insights into navigating potential challenges, while reinforcing much of what we advise our clients–effective integration planning and flawless execution are necessary components for capturing a deal’s full value.”

According to Deloitte's release, 2014 was a strong year for M&A activity, with more than 40,000 announced deals that reached almost $3.5 trillion in aggregate value. The statistics for January—in which there were deals totaling $232.9 billion—also suggest that M&A activity will be robust this year.

One-Third Fell Short 

Deloitte's survey in November and December polled 800 executives from U.S. companies that were engaged in a merger and acquisition during the last two years, were planning one in the next year or both. Almost one-third of the respondents said their deals fell short of expectations.

Respondents also said that for future deals, they will focus on swifter and phased integration, as well as a more rigorous process to select an integration team.

The study suggested that some best practices may help ensure deal success. In addition to planning for a smooth transition from the very beginning of the merger, deal parties should:

• clearly understand what they expect to achieve from the merger;

• involve executive leadership from both the acquirer and target companies;

• develop an appropriate plan that optimizes the use of resources, budget and timing;

• establish a cross-functional post-integration leadership team; and

• ensure transparent and consistent communications with employees regarding the merger.

 

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The survey is available at http://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/integration-a-key-factor-in-ma-deal-success.html.