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- 1. Tailored learning Cass Executive Education bespoke programmes Mergers and Acquisitions (background) Prof Scott Moeller
- 2. M&A Volumes go in Waves… and we're now on the downward slope Source: Thomson Financial 2
- 3. Most acquisitions historically have been failures… 1987 McKinsey 116 acquisitions 61% failed . Porter 1996 Mercer/ Business Week 150 deals 57% failure rate, 30% had 'substantial' losses . Economist 150 acquisitions 70% failed to meet expectations . McKinsey 160 acquisitions Only 12% accelerated their growth 1997 Sirower 168 mergers Only 20% return in 4 years 1998 A. T .Kearney 115 mergers 58% added no value 1999 McKinsey 2001 KPMG 118 acquisitions 70% created no value / 31% destroyed value 2004 BCG 277 deals 64% destroyed value for acquirers’ shareholders 56% of all acquisitions get sold off 77% fail to yield expected synergies 3
- 4. Blue – Non CFO – CFO survey Why do M&A deals fail? Rank Top 10 Pitfalls in Achieving Synergies Negative Impact 1 Incompatible cultures 5.60 2 Inability to manage target 5.39 3 Unable to implement change 5.34 4 Synergy non-existent or overestimated 5.22 5 Did not anticipate foreseeable events 5.14 6 Clash of management styles/egos 5.11 7 Acquirer paid too much 5.00 8 Acquired firm too unhealthy 4.58 9 Need to spin off or liquidate too much 4.05 10 Incompatible marketing systems 4.01 Note: Survey of Forbes 500 CFOs. Assessed on a scale of 1 to 7, where 7 is high. 4
- 5. M&A Paradox Most mergers fail, but few companies succeed without acquiring or merging. – – – Can you be a large organisation without having made acquisitions? Is organic growth sufficient to become a leading player? Is there a 'best time' to make acquisitions? Management’s challenge: 'How can you reconcile the low odds of deal success with the need to incorporate mergers into the growth strategy.' Or today… 'How to make deals successful NOW when the market's going down?' 5
- 6. The current merger wave is different… 1987 McKinsey 116 acquisitions 61% failed . Porter 1996 Mercer/ Business Week 150 deals 57% failure rate, 30% had 'substantial' losses . Economist 150 acquisitions 70% failed to meet expectations . McKinsey 160 acquisitions Only 12% accelerated their growth 1997 Sirower 168 mergers Only 20% return in 4 years 1998 A. T .Kearney 115 mergers 58% added no value 1999 McKinsey 2001 KPMG 118 acquisitions 70% created no value / 31% destroyed value 2004 BCG 277 deals 64% destroyed value for acquirers’ shareholders 2006/7 Cass / Towers Perrin 1,400 acquisitions ‘Only’ 47% destroyed value since 2003 2007 McKinsey 1,000 deals 58% overpaid since 2003… but since 2003 deals created value 56% of all acquisitions get sold off 77% fail to yield expected synergies 6
- 7. And 2008 looks to be even better! Short term Shareholder Return 7
- 8. What has changed in the past several years? Drivers Most organisations are now far more disciplined and focused in their transactions than ever before. In particular, we have noted, and confirmed by live interviews, the following recurring themes: Get Culture Right Improved Deal Selection Razor Sharp Focus on Integration 8
- 9. Three essential Components to a Merger Deal 9
- 10. M&A: The Seven Deadly Sins Source: financialworld.co.uk, March 2007 10
- 11. Good and bad reasons for doing deals 11
- 12. Criteria for Target Assessment 12
- 15. Public Deals: 6 Step Process 15
- 17. Due Diligence ‘Know thy enemy and know thyself; in a hundred battles you will never be in peril.’ Sun Tzu 400-320 BC 17
- 18. Due Diligence Key success factors 18
- 19. Post Merger Integration ‘A wise person once said that a beautiful marriage is one in which two people become one. The trouble starts when they try to decide which one.’ 19
- 20. Change or Preserve? High Change in Target Low High Change in Acquirer 20
- 21. Focus of Integrations Source: Mergermarket / CMS Cameron McKenna, Feb 2007 21
- 23. Poor communication (use of "killer" phrases) highlights poor underlying strategy 23
- 24. Two related "killer" phrases 24
- 25. More communication indicators of poor implementation 25
- 26. Summary: Key Success Factors in Post-Merger Integration 26
Notes de l'éditeur
- This is what CFOs are saying – Survey of Forbes 500 CFOs conducted in the mid 1990’s Indeed, most past studies have shown that the most common M&A pitfalls are people related
- We feel strongly that the companies have learned from the past, and now invariable address people issues head-on. In particular, from what we have seen working with all our clients, and corroborated by a series of interviews, we have found these 3 key areas of learning