Barriers to success
However, successfully completing a large-scale M&A transaction is a complex process. There is the potential for any number of mistakes or problems to arise throughout the process. These barriers to success largely fall into seven categories:
(1) Overindulgent optimism: when one or both parties see a greater opportunity than the data is indicating.
(2) Poor structural engineering: overlooking critical building blocks, such as over-leveraged financial statements or employment agreements with essential personnel.
(3) Ineffective organisational integration: the challenge of merging organisational structures and handling employee reactions to change.
(4) Insufficient time allocation: completing a takeover is a lengthily process, which requires time to ensure it is handled correctly.
(5) Inability to execute the business plan: if weaknesses in the post-merger management team are not identified, the M&A is unlikely to be successful.
(6) Lack of proper data preparation: failing to take a measured and studious approach to organising business data.
(7) Absence of secure business tools: failing to protect valuable business data, which could be used for a competitive advantage if it fell into the wrong hands.
So what can you do to address these challenges and ensure your M&A is a success?
The secret to starting a successful M&A
When buyers and sellers enter the M&A process, initially they have very different goals in mind. For example, a buyer may primarily be concerned with the expected valuation, whereas the seller is more interested in the expected target audience. Therefore, in order to ensure the M&A completes successfully, you need to align these expectations so everyone is clear on the final outcome and working towards a common goal. This is achieved through:
These are areas where the newly merged organisations can achieve substantial cost savings to maximise the business value of the transaction. For example, identifying operational redundancies or moving employees or equipment to another location.
Markets and corporate spending priorities change over time. Therefore, it’s essential that all potential synergy savings are discovered, and acted upon, within a reasonable period of time. By acting quickly, you reduce the potential for “deal fatigue”, where your M&A deal is less likely to complete.
Leveraging information, resources and tools
Your success relies on securing fast access to critical, accurate, time-sensitive information, which enables you to make business decisions. To achieve this, you need robust systems that give you the ability to leverage resources and identify potential challenges and prevent mistakes.
This controlled, secure access to information, which enables timely decisions to be made about synergy savings, can easily be achieved through implementing an online virtual data room (VDR). It optimises the due diligence process by overcoming the limitations of traditional paper-based data environments. In the VDR, all documents are captured and indexed to an online database, making information discovery more accurate and complete. And since access rights are designated by the seller, tighter security and control is guaranteed. The end result is that:
– Buyers: have access to timely and accurate information to review the opportunity.
– Sellers: are empowered to protect their valuable business critical data.