For more successful mergers and acquisitions, play 20 questions
June, 05th 2019
How are we going to grow? It’s a perennial question, and for many senior executives, “mergers and acquisitions” is the quick answer. But such deals are more risky than many executives realize. The stats are sobering: 65 to 85 percent of mergers and acquisitions fail to create shareholder value. One-quarter even destroy it.
Why do so many deals go badly? In general, firms are unprepared and inexperienced to manage complex events, according to a 2011 McKinsey survey of senior executives. The majority of firms do less than one big deal annually, and only one-third of companies have dedicated integration teams. Such deals become special, high-cost events, fraught with risks of losing talent and customers. But given that mergers and acquisitions are so regularly pursued, companies should develop the framework to handle them. They should start by evaluating four areas: strategy, architecture (the organization’s structure), “plumbing and wiring” (technology and operations) and culture.
Here are the 20 critical questions companies can use to assess prospective deals. These questions are meant to spark fruitful conversations and help companies plan, particularly the questions for which the answer isn’t an easy “Yes.”
STRATEGY: CREATING NEW VALUE To be successful, deals need to have a clear vision and mission for exactly how they’ll create economic value, plus a realistic sense of where challenges may lie. 1. Are senior leaders in agreement on the strategic goals of this acquisition? 2. Have we identified and prioritized the sources of value? (Is value primarily in the resources/assets we’re getting — or the capabilities of the firm?) 3. Do we know who will lead the integration efforts and be responsible for the results? 4. Can we keep the core business going during integration? 5. Have we identified our biggest risks, and do we know who can make quick decisions if/when we hit problems?