How to capitalize on past M&A learnings for future deals

How to capitalize on past M&A learnings for future deals

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“During an M&A deal, the smallest details can make or break a deal and pile up a potentially big bill”

Mergers and acquisitions are a powerful financial tool for propelling the business forward. Most of the time, they can prove to be difficult, frustrating, and time-consuming bids with no promise of success. And there’s no way around it; it’s the essence of the work and the process.

The complicated procedure of mergers and acquisitions is often compared to attempting to complete a massive puzzle when your right hand and your left hand have never worked together. Mergers and acquisitions, to put it lightly, include a lot of moving parts. And the fact that there are suddenly two entities and additional partners who must collaborate and interact equally and smoothly to complete the transaction further complicates the matter as well as the process.

Mergers and acquisitions (M&A) are one of the most efficient ways for a business to grow into a new market or a country. Trust between the parties, the financial status of the companies, a successful due diligence process, a favorable regulatory environment, shareholder agreement, and other considerations all play a role in a successful merger or acquisition.

We’ve learned over the years from the innumerable deals we have made that the smallest details can make or break a deal and pile up a potentially big bill. Moreover, in this article, we will try to understand how those small little things can help us in driving a huge turnover for a company.

Now, if we talk about opportunity creation and well-capitalized companies then, they are yet to face a once-in-a-generation opportunity to make acquisitions and consolidate power. Keeping into consideration the brunt impact of the COVID-19 virus on the economy, weaker players, which were allowed some breathing space by temporary government assistance schemes or by relying on cash savings, are likely to face even greater financial hardships, making them vulnerable to an acquisition.

In such a situation, if history wants to repeat itself then it’s pretty predictable that most of the CEOs are bound to pursue deals that are more likely to hurt their companies and we all know about the destruction that failed M&A deals cause. Not only do they destroy shareholder values but also cost companies billions.

But why do you think this happens?

Inexperience is one such aspect. Many senior executives work on one, maybe two, highly consequential deals in their professional lives and these are often the most challenging and risky endeavors they encounter. However, there are other ways for leaders too to increase the chances of their deal being successful. In this article, owing to past experiences we have tried to establish some pointers that could help in adding value to a deal and making it even more successful.

Prioritizing “strategic” over “financially savvy”

Often the term “strategic” is used to glam up a deal that doesn’t make financial sense. The single best predictor of M&A failure is overpaying. Consider the $350 billion AOL-Time Warner acquisition, which occurred in 2000. It was billed as a merger that would create the media company of the future, but it is now widely regarded as the worst deal ever made. The merged entity was forced to pay down $99 billion in just two years. After ten years, the total capital of the two firms (which had merged by that time) was around one-seventh of what it had been on the day of the merger. Such well-known examples of failed “strategic acquisitions” include the mergers of Vodafone and Mannesmann, Hewlett-Packard (HP) and Autonomy.

In such a situation, think about what you would do to avoid making the same mistake? To begin, ask yourself four important questions: What is the point of merging? Why did you choose this firm? Why are you doing this now? What is a reasonable price? Then behave like a financial investor and set a “walk-away price” that you will not exceed. Do not be seduced by the bid. Confirmation prejudices, impulsiveness, and even hubris can both be mitigated by a team of cross-functional managers.

Not letting cultural differences come in your way

When integration stalls and major write-downs must be booked, culture is often blamed. But the problem is not the cultural differences per se; it is being unprepared to deal with them.  It is critical to evaluate each firm’s respective cultures during the deal planning phase, and design M&A processes to close any gaps. However, there is no such thing as a one-size-fits-all solution. Several acquirers succeed by imposing their culture on the companies they buy-in, some acquirers choose to integrate some aspects of the acquired company’s culture into the merged entity, while others choose to let the bought company run separately.

Therefore, cultural differences are never an issue until you decide to make it one. The true value killer here is not being mindful of or prepared for any of these differences. A well-managed M&A would include identifying the majority of cultural issues and preparing solutions for them before the deal closes.

Establishing a link between the Pre-deal & Post-deal Integration

Companies should have a continuous process that connects the pre-deal phase with the post-deal phase. We have tried to highlight some of the key learnings which one can apply during the deal to establish a link between the pre-deal and post-deal integration process below:

  • Due Diligence is a specialized function that is very critical to the entire integration progress. It is important to have a Deal Manager who conducts Due Diligence and also has extensive expertise with a variety of roles. Apart from this, maintaining continuity of personnel during the Due Diligence period should be a must.
  • Integration (and acquisition) performance and success rely heavily on the due diligence process. The importance of employee continuity cannot be underestimated in any way. Any aspect of the Integration process (as detailed in the PMI 100 Day exercise) cannot be overlooked or missed. Failure to adhere to any of these small little details can cause serious blunders resulting in unfavorable consequences.
  • Understanding the parameters of the deal’s performance way ahead of time is another crucial move. The first year’s performance is an important metric for determining progress during the integration process. First-year commitments should be extremely vigilant, as per the Business Plan, to ensure that there is more emphasis laid on broader integration rather than just meeting the Business Plan’s targets.
  • The team and effort including the management time required for acquisitions and integration process are not directly proportional to the size of the acquisition. It is more related to the complexity of the deal, the company that is being acquired, geographical reach, and other businesses handled. This is not appreciated towards the end as it further adds to the overall cost of the acquisition. Again, if we add all these costs (fully loaded costs), smaller acquisitions will be tough to justify (need to be mindful and prepared for any scenario).
  • After achieving a significant milestone during the process of completion of the deal, the M&A team can document all the lessons learned, have a debriefing session with all the stakeholders, and archive all this knowledge in a single location so that other M&A teams can view and access it during future transactions.

The companies that refuse to delegate detailed roles and stringent responsibility to the departments in charge of researching, preparing, negotiating, and executing the acquisition are the ones most likely to lose value. Instead, every step of the deal should be handled by the same team.

Talking about an example, when First Gulf Bank (FGB), the UAE’s largest publicly traded bank, purchased Dubai First (DF), a financial player focusing on consumer finance and credit cards, it established some guiding principles. The bank assembled ‘A Team’ of about two dozen people from across its businesses and functions to evaluate the target, identify synergies in their areas, and prepare a binding bid. Many of these same team members went on to lead the integration effort and were therefore accountable for achieving the gains that they had outlined when recommending the merger.

Avoiding poor communication among the team members

 In the words of Mr. Dharmendra Singh (CEO-MergerWare), ‘Communication is the key to any M&A deal and we should keep communicating repeatedly even if it looks like over-communicating sometimes’.

Most of the time employees and consumers suffer greatly as a result of the confusion created by future mergers. In such situations, Managers should always be prepared to answer questions long before the final responses are available from the higher authorities as bad news is always more preferable to no news for the employees. Along with transparent contact, speed also plays a vital role here. Another important fact is neither your customers nor your rivals can standstill, as they often take advantage of these quiet times to rob business from either company (acquirer or target). Therefore, one must integrate quickly and negotiate openly while ensuring that operations run seamlessly and that communication among all the teams is smooth and transparent.

Using an effective M&A Playbook to ensure deal success

An M&A playbook is a step-by-step guide to completing a merger or acquisition. It includes some of the most effective, tried-and-tested strategies for assisting the company during this dynamic, information-dense period. Many businesses struggle to create a robust playbook led by the strategic growth leadership team. It is used in a variety of organizations to aid in the development of a systemic approach during the deal process.

The majority of times, M&A Integration teams need a resource to assist them in working quickly, coordinating activities, and seeing the complete 360-degree view – from the big picture to the minor aspects of a deal. In such situations, an extensive M&A playbook can keep everyone on the same page and help in delivering the correct value for the deal.

Merging two or more businesses is a complicated and risky process. The most effective transactions are those that adopt a systematic and focused strategy that includes specific business goals, thorough due diligence, robust integration strategies, and an emphasis on generating and capturing value.

Our team at MergerWare takes immense pride in being acknowledged as the best-in-class M&A software, developed by M&A professionals with decades of M&A integration experience, including developing comprehensive M&A playbooks through the merger life cycle, establishing integration strategies, teams, driving deal value, development targets, and acquisitions across several billion dollars.

MergerWare’s all-in-one M&A software makes it simple to fine-tune layouts based on industry information and lessons learned, giving teams an end-to-end approach for deal management transactions and similar organizational growth actions.

If your company is looking for a successful M&A deal, our years of professional experience in deal-making can prove to be one of the most powerful weapons for you.

Want to know how?

Visit us at and schedule a personalized demo with one of our product specialists to get more information about the same.