Are companies getting better at M&A?

By Jason Rigoli, Principal at The White Oak Group

As I follow major M&A deals playing out in the news, including Kraft/Cadbury and United/ Continental, I often wonder if executives at these companies have learned from the mistakes of infamously bad deals such as AOL/Time Warner.

In the past on Corporate Growth…Capital Style, I’ve outlined tips on how to maximize M&A deals. Along this same topic, I came across an article in BusinessWeek earlier this week regarding M&A success. The article referenced research from Accenture that found half of large corporate mergers create at least marginal returns, which is an improvement from a decade ago when research showed as much as 75% of mergers destroyed shareholder value as of two years following the merger.

So, the question is, are companies getting better at M&A? According to the Accenture research, the answer is, “yes.” To successfully capture the value of the deal, companies have begun to follow a lifecycle approach to M&A, which includes the following three stages:

1. Conducting due diligence
2. Understanding the cultural issues with each organization and aligning appropriately
3. Planning and executing the integration process

While we’ve covered the first two of these stages in the past, we haven’t provided many details on how to successfully integrate two companies. This is often viewed as the most difficult stage for companies to master as part of an M&A deal. The article offered the following five tips to accomplish the integration process:

1. Create value. By focusing on the ultimate goal, executives are better able to have a clear vision of the merger, and therefore, set the integration strategy to achieve that goal.
2. Establish clear aspirations. Executives must under-promise, but over-deliver on their synergy targets to investors.
3. Have you’re “A” team working on integration. Many companies make the mistake of keeping their top executives focused on the day-to-day operations of running the company. Having your best players focused on integration delivers the best results.
4. Communicate early and often with employees to avoid lost productivity and ease the rumor mill.
5. Embrace change. M&As provide unprecedented opportunities for change, so instead of maintaining business as usual executives should take advantage of the opportunity for change.

While this is a good list of tips for successful integration, there are bound to be additional tips that can be added to this list. If you have any additions, drop us a comment and let us know about them.