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The Facts about Mergers & Acquisitions: 

Most M&A transactions fail to achieve their forecasted financial objectives.

Traditional due diligence overlooks the risks involved with business integration.

M&A experts agree, "culture clashes" undermine performance.
Half of US companies that attempt an M&A transaction lose value within one year.
Poor performance affects companies regardless of size, industry, market, or market cycle.

Aligning workforce interests with business strategy requirements is imperative.

 


 

 

Why Business Marriages Fail
Connie Barnaba

Business Marriages Are Risky

 

Office Building, Mergers & Acquisitions in Houston, TX
 

M&A experts agree that the traditional due diligence process captures the financial and legal risks involved with business marriages but overlooks significant risk to the people who drive deal value.  Frequently, M&A partners that appear to be a perfect strategic fit may turn out to be a “fatal attraction” when the first problems arise and the newlyweds discover that they have irreconcilable differences when it comes to how they communicate, their decision-making process, and the values that guide decision-making.  The first signs of trouble are likely to show up in the executive suite – after the union has been consummated.

 

The dismal track record of US companies attempting a merger or acquisition suggests that the majority enter into these business marriages totally unaware of the post-deal integration problems that will confront them.  As a result, these unions quickly become mired in conflict and distrust that undermine relationships and lead to the rapid destruction of value.  The good news is that love does not have to be blind.  If you know the risks before you tie the knot, they can be effectively managed.

Managing M&A Integration Risk

Before
You Tie the Knot
During
the Honeymoon
After
the Honeymoon

Analyze

Stabilize

Maximize



Analyze Risk

Stabilize Value

Maximize Performance


M&A experts agree that “cultural misalignment” is a significant contributor to the poor performance of companies attempting M&A transactions. Traditional due diligence identifies the risk associated with target selection.  However,  there is another category of risk inherent with post-deal integration of operations that is overlooked by due diligence. Success with these deals depends on a clear understanding of the changes required by the business strategy and how those changes are likely to affect people – the key value drivers of the deal.  Attempting an M&A transaction without an upfront integration risk assessment is like walking a tightrope without a net.  It’s likely that there will be a fall with serious consequences.


Half of the US companies that attempt an M&A transaction with the goal of growing the business end up losing value within a year following deal close. A business strategy is only as strong as its execution.  An effective M&A business strategy must incorporate an effective “people strategy” because you rely on your workforce to get the job done. This is where many deals get into difficulty. They have no “people strategy.”





Despite the fact that the underlying reason for most strategic M&A deals is improved performance, the  overwhelming majority of US companies that attempt M&A transactions fail to perform as projected.  Some never reach their financial objectives.




What We Do

What We Do

What We Do

We conduct a pre-deal assessment based on the client’s responses to an online survey that provides a high-level analysis of the post-deal integration risk that is likely to occur as a result of cultural differences between the client’s company and the selected target company.

With the Risk Profile as a guide, we assist you in aligning the interests of your workforce with the requirements of your business strategy.  We help you communicate with all stakeholders, retain talent, support managers, and reduce anxiety levels in order to stabilize operations before initiating critical changes.

We help you execute your risk management strategy to ensure that the changes required by integration of business operations are made in a way that does not derail the execution of your business strategy.

How We Do It

How We Do It

How We Do It

Based on the results of the pre-deal risk assessment, we create a Risk Profile for the client highlighting the areas of risk exposure, providing a summary of the underlying causes, and forecasting the financial impact of that risk if it is triggered.

Our first priority will be to explain the Risk Profile to the client’s Leadership Team, the implications for effective execution of the merged company’s business strategy, and the priorities for creating a “people strategy” that stabilizes the business operation.  After that meeting, the client must approve the Risk Mitigation Cost Estimate and subsequent delivery of risk management services.

We assemble a team of experienced professional service providers from our Preferred Provider Network who specialize and excel in the mitigation of your risk. They conduct a more in-depth risk analysis, determine an effective solution, estimate the time and cost, and deliver the solution on time and on budget.

Value

Value

Value

The Risk Profile provides the acquiring company with a comprehensive picture of the risk involved with integrating the operations of the client and the target company. This provides an opportunity to adjust the value of the target based upon the number of risks and the perceived level of risk exposure.  The Risk Profile also allows the acquiring company to incorporate effective risk management solutions into the business strategy.

A discussion of the Risk Profile gives the leadership team a shared understanding of how changes necessitated by the business strategy are likely to impact operations. Having that information prior to (or immediately following) announcement of the deal provides a roadmap of where the greatest “shocks” to operations are likely to occur, who will be impacted, how, and why.  This provides a distinct advantage to the leadership team in developing the messages to be communicated to the stakeholders.

Our support with the integration process ensures that your workforce is not distracted or overwhelmed by the demands of running the day-to-day business operation and integrating business operations at the same time.  Your success is our success.  If you are not satisfied that we delivered on our commitment, then you are under no obligation to pay our consulting fee.


Contact us today for risk management service.