To take the lead and remain competitive means shifting to new business models that can sustain increased disruption, industry convergence and technological change. This is why value creation in deals has never been more important.
Along with Mergermarket and Cass Business School, we surveyed over 600 global corporate executives to find out how they create value through M&A activities.
Those who had planned and prioritized value creation have a better track record of maximised deal value, as opposed to those who passively await value as a natural consequence of the process.
What if you took a different perspective to your M&A?
#BeyondTheDeal
“The findings show an impressive shift in viewing M&A as just a process consisting of Signing and Closing milestones. M&A transactions are now considered as drivers of long-term value; with the value creation proposition at the heart of every deal.”
“98% of companies that say their last acquisition created significant value also say they have a formal value creation methodology.”
- An integration strategy should already be in place at the time of signing.
- Over two-thirds of companies whose deals created significant value relative to purchase price had the most extensive and far-reaching pre-deal activity.
“86% of companies who say their last acquisition created significant value also say it was part of a broader portfolio strategy rather than opportunistic.”
- Traditional 100-day planning is not enough anymore. You need to have a comprehensive value creation plan 30 days before the deal signing.
- The plan should be ready for implementation right after the signing. This is why your diligence team should stress test the value creation plan ahead.
“68% believe they can improve their target selection to better meet strategic needs.”
- Understand where your business needs strengthening or expanding in order to deliver on its ambitions.
- Make sure that your M&A strategy is at the heart of your business strategy.
“84% believe there is room for improvement when presenting upside opportunities to buyers.”
- Make sure your sell-side due diligence presents the full potential of a business and a vision for the future.
- Review opportunities for optimising the asset from a tax and legal structure perspective and how you present upside opportunities to buyers.
“92% of those who say their last divestment created significant value also carried out sell-side due diligence.”
- Successful sell-side due diligence can help you anticipate any buyer concerns and mitigate them in a timely manner.
- Implement a formal value creation methodology from Day One. Think like a buyer, even when you're selling.
“89% of divestors surveyed believe they could drive more value from a sale by engaging with the management team more closely.”
- Keep value-creating talent informed and engaged, and find out how you can incentivise the asset’s management team to maximise value.
- Embed your value creation plan in a long-term strategy and reinforce it by careful cultural considerations.
"Our survey shows that a modern, effective approach to value creation entails creating a harmonious collaboration across all M&A areas. As evidenced by the 89% of divestors who said they believed more value could be driven by closer engagement with the management team."
Lessons to be learned:
Two-thirds of our respondents admit that given the chance, they would prioritise value creation right from the start.
Rather than prioritising value creation, 30% of organisations said that they prioritised rebranding on Day One, whereas 2% later admit that it should not have been a priority. Branding is important, but it is more important that the business behind the brand be built on a sound, strategic plan.
In our report, we will outline the key findings, discuss their implications and share our insights on how to further advance and refine the way you approach value creation within your own organisation.
