India is currently seeing a boom in M&A deals with transactions reaching approximately $105 billion in 2018 by Q2 end according to Bloomberg.
Clearly inorganic growth is becoming a preferred method of growth in this developing economic scenario. But the question we must ask ourselves is, how many firms are successful in unlocking the value in these deals? And moreover, how does one quantify the performance of the combined entity or the entity that divested a part of its portfolio to understand whether the move has resulted in a positive outcome.
According to McKinsey & Company, almost 70% of M&A deals fail to achieve the projected revenue synergies, while 40% fail to achieve the cost synergies projected.
To ensure that you achieve the synergies and gain competitive advantage a clear well-structured M&A strategy is required.
Successful M&A deals often come from those who have prior experience in engaging in inorganic growth. While experience is not the only factor that ensures success, it is indeed a contributing factor. If you do not possess the necessary capabilities in house, then it is highly advisable to have a clear strategy formulated for M&A and to have strong program/project governance skill sets in place before embarking on this journey.
The key success factors apart from experience are –
A good understanding of why you are seeking a merger or an acquisition or a divestiture. What key capabilities are you trying to acquire, are you refocusing your competitive strategy and wish to sell off businesses which do not fit with your overall vision, do you want to ensure that your business isn’t disrupted due to lack of knowledge or technology? An in depth understanding of why this move is necessary is imperative.
A thorough and factual due diligence of strategic, financial, legal and cultural factors is essential before proceeding with the deal.
Planning and execution of the integration process requires expertise in communication, program management and overall change management skills to ensure the synergies are achieved and key talent isn’t lost during the process. Continuity of leadership is an important area where most firms tend to fall short.
We help clients achieve lasting results through our deal advisory services from strategy to execution whether they need to do merger/acquisition, divestiture, capital raising, partnership, or financial turnaround for their company. We combine our deep industry/sector know-how, analytical tools, connects with various investors, IBs and PE firms, to help clients achieve best value out of the deals.
We offer our service to clients who look to acquire or merge, divest or raise capital to fuel growth.
We follow a six-step approach:
- Strategy Design – Identify Strategic imperatives of the client and evaluate strategic options (Acquisition, Alliance or JV)
- Screening & Selection – Develop target profile (Buy/Sell side), evaluate fit and contact targets
- Initial Assessment – Market analysis, target overview, deal rationale, synergy assessment and risk analysis
- Due Diligence – Strategic, commercial and organizational due diligence
- Negotiation, Completion and Closing – Valuation, Binding offer, Negotiation and closing of the deal
- Post-Merger Integration – Post integration roadmap creation, Integration team/ cell creation, communication and change management