Mergers and acquisitions are tough. On average, about 40% of all companies that are acquired need a lot of care, so they remain viable. Because many of these mergers and acquisitions require strategic decisions and decisive actions, companies must come up with plans to make the merger or acquisition successful. In this article, we will look at five key factors that differentiate successful mergers and acquisitions from unsuccessful ones.
The acquiring company must have a solid strategy that can be executed immediately after the merger and acquisition is done. The most important factor to consider when developing this strategy is why the acquiring company is doing the acquisition. Do they want to grow their brand? Take over the market? Increase profits?
The strategy the company comes up with must be completed before the executing teams are convened. This is so that there these teams are not idle having been convened with nothing to do or clear directions to follow.
Once clear objectives and rationale for the merger and acquisition are pinned down, the functional and tactical tasks needed to make the merger and acquisition successful can be executed.
The importance of communication in merger and acquisition talks cannot be overstated. This is the point of the deal-making when both sides of the negotiation discuss everything that has to do with the deal. Communication has to be honest, frequent, and open so that all parties can feel comfortable during the negotiations. It can include everything from talking on the phone, sending emails, or even documents back and forth.
Parties that work with a lot of documents during the negotiations can use a virtual deal room to send, receive, and review documents. This ensures the deal goes smoothly and completes faster.
Successful mergers and acquisitions have one thing in common – shareholder value is increased. The acquiring company has to ensure that it maintains the value of the first company while increasing the value of the acquired company.
The day of the announcement of the deal is when there is the most risk to the value of both companies. Therefore, this process has to be managed very carefully. If there are any delays in the rollout of the deal, the value of both companies might decrease due to lost sales, customers, and decreased productivity.
This is another key factor in the success of a merger and acquisition. The senior leadership of the acquiring company must be committed to making the deal work. They must have a plan in place to deploy the necessary assets and execute their acquisition strategy.
Leadership also extends to the whole senior management level of both companies; their thoughts and actions must be aligned with those of the “business owner.” Without this top-down execution of the acquisition strategy, the whole exercise might fail to achieve the goals it was set out to achieve.
It is easy to lose focus on the running of the two individual businesses during a merger. To ensure the balance is maintained, it is a good idea to get a team composed of people from both businesses to ensure the individual businesses continue running through the merger and acquisition process.
Even though mergers and acquisitions can be challenging, things will go more smoothly if there is effective and frequent communication, both businesses continue to run throughout the process, and the announcement of the deal is handled with utmost care.