Hearts and Minds - The Key to Successful Mergers

The merger and acquisition (M&A) boom of the last few years shows few signs of easing up. Most acquirers have the wherewithal to continue making deals and paying fat premiums. The implication however is clear: the executives doing the deals are bullish that they can realize synergistic value.”

Many observers and many independent studies question whether M&A’s truely add value. Executives also point to the unfulfilled realisation of synergies. Only half of the senior executives polled in a 2006 Intelligence Unit survey believed that their companies had achieved the revenue synergies they had expected from their M&A activities, and just 45% affirmed that expected cost synergies had been captured.

Although acquirers are getting better at identifying and capturing synergies, many deals still do not recover their acquisition premiums and others fail to achieve the long list of benefits touted by management as the rationales for doing the deals in the first place.  Some of these failures are clearly the result of overpaying for targets, but others are due to an incorrect understanding of what exactly synergies are, and how they should be captured.  There are several factors that are easy to overlook, or under-appreciate when deal-making and emotions run high.

Mergers & Acquisitions continue to be a critical strategic tool for Australian corporations looking to drive tangible bottom line improvements.  M&A offers the promise of rapid growth, and bottom line benefits in a world where CEOs are under increasing pressure to drive short term improvements and where stakeholders are becoming more and more impatient with below average share-market performance.  

The challenge is that few organisations actually deliver on this promise – in fact over half of all mergers fail to deliver the anticipated benefits.  Why is this, and why does the M&A option look so good on paper, but success is rarely achieved in reality?  Mettle Consulting has extensive experience in addressing the human element issues surrounding these critical questions and provides pragmatic solutions to numerous clients.