September 6, 2018

Integration: There’s No Substitute for Speed

Integration is the most challenging part of a deal, and this PwC blog says that companies that are good at it share one thing in common – they move fast.  Here’s the intro:

When integrating a deal, speed clearly makes a difference. There is little value in a prolonged transition. Many companies have underperformed on the justified price and expectations set for the deal. Disappointing operating results and returns that rarely exceed the cost of capital are common. Numerous academic studies have found that most acquisitions destroy, rather than create, shareholder value. Many companies fail to recapture pre-acquisition performance levels despite valiant efforts to increase revenue, reduce expenses, and divest underperforming assets.

Execution is critical. Deals seldom fail because they are strategically invalid. Rather, failure is commonly a result of poor integration execution. In today’s world of sophisticated strategic and financial buyers, justifying the premiums needed to successfully close a deal depends on swiftly and efficiently capturing deal synergies. Speed is vital. So is focus on decisive objectives – actions that can quickly create shareholder value.

One interesting statistic that the blog points out is that companies are getting their integration teams involved in the M&A process earlier than in the past. For example, in 2013, only 21% of integration teams were involved during deal screening – by 2016, that percentage rose to almost 32%.

John Jenkins