Prof. Bill Kaufmann, Faculty of M&A Integration, College of William & Mary's Mason School of Business and at Sum COX School of Business, Writes about why M&As can go bad, and why 75% of them actually Destroy Shareholder value for the acquirers. Co-Ordinated
WHY IS REALIGNMENT NEEDED WHEN INTEGRATING AN M&A?
The new company that is now before you is a new company. So it has to be treated differently. Here are the reasons why: (1) Turnaround candidates: Sometime you realise that the company with which you are shaking hands is – crudely stated – a loser. What do you then? You have to believe that you can turn it around and make it a winner; (2) Future acquisitions: Just because you spend money on one does not mean that you may not enter into another inorganic deal. Prepare for the next one; (3) Accelerated growth: In order to achieve synergies and grow fast, the combined entity actually has to act like a combine. You can’t grow if you are fragmented; You’ll need new strategies for your new business model; and (5) New markets, products, distribution, customers: Optimising the new organisation and it’s value is critical. Post-merger or post-acquisition, you are no longer the same old company. Your entire business is now “new”! Remember, your competition isn’t going to wait for you to get organised. So you should take as little time as possible to get your soldiers in line!
WHY DO YOU NEED TO BE CAUTIOUS ABOUT THE HYPE OF M&As
My experiences and some studies show that 50% or more of upper-middle management and above will be replaced or eliminated, if acquired. There will be consolidation of locations. Operations close, people move, terminations and disruptions occur. This is inevitable. Workers need to be prepared for at least 10% of job loss at the acquired company after the integration is complete. Worse, 75% of M&As fail to achieve their “stated” communicated objectives prior to the event and many acquisitions fail to increase shareholder value and most actually reduce value short term.
It’s much more fun being the acquirer than being acquired. But my observation is that no matter which side of the merger or acquisition you’re on, few people including senior management are asking the question, “What’s in the best interests of the combined companies?” Instead, the question seems to be, “What’s in it for me, how do I come out on top and what do I have to do to survive?”
Be careful what you wish for in the name of M&A. You may lose it all!
The new company that is now before you is a new company. So it has to be treated differently. Here are the reasons why: (1) Turnaround candidates: Sometime you realise that the company with which you are shaking hands is – crudely stated – a loser. What do you then? You have to believe that you can turn it around and make it a winner; (2) Future acquisitions: Just because you spend money on one does not mean that you may not enter into another inorganic deal. Prepare for the next one; (3) Accelerated growth: In order to achieve synergies and grow fast, the combined entity actually has to act like a combine. You can’t grow if you are fragmented; You’ll need new strategies for your new business model; and (5) New markets, products, distribution, customers: Optimising the new organisation and it’s value is critical. Post-merger or post-acquisition, you are no longer the same old company. Your entire business is now “new”! Remember, your competition isn’t going to wait for you to get organised. So you should take as little time as possible to get your soldiers in line!
WHY DO YOU NEED TO BE CAUTIOUS ABOUT THE HYPE OF M&As
My experiences and some studies show that 50% or more of upper-middle management and above will be replaced or eliminated, if acquired. There will be consolidation of locations. Operations close, people move, terminations and disruptions occur. This is inevitable. Workers need to be prepared for at least 10% of job loss at the acquired company after the integration is complete. Worse, 75% of M&As fail to achieve their “stated” communicated objectives prior to the event and many acquisitions fail to increase shareholder value and most actually reduce value short term.
It’s much more fun being the acquirer than being acquired. But my observation is that no matter which side of the merger or acquisition you’re on, few people including senior management are asking the question, “What’s in the best interests of the combined companies?” Instead, the question seems to be, “What’s in it for me, how do I come out on top and what do I have to do to survive?”
Be careful what you wish for in the name of M&A. You may lose it all!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
