Holistic M&A: What areas of your organisation will add most value?

As the bar for deal value rises, how can you maximise the benefits from M&A and ensure no value is left on the table?

Successful M&A is a marathon not a sprint. While most of the focus tends to be on the negotiations, the foundations for success should be laid much earlier in the value identification phase. And, none of the value can be delivered without clear planning and co-ordination of integration and operational change.

A combination of rising acquisition prices and the transformational focus of many of today’s transactions heightens the importance of starting earlier and drilling deeper in evaluating your strategic options. Scale alone may not be enough to compete in markets facing disruption and change – how can you acquire the capabilities needed to satisfy shifting customer demands? In turn, your business has to deliver a higher return to make dealmaking worthwhile – how can you identify and optimise the levers that will add most value?

The right choices
In answering these fundamental questions, our analysis and work with clients underlines the importance of a holistic evaluation that enables your business to understand all the different strategic, financial and operational choices that affect deal value. Which technologies would enable you to compete in a market targeted for growth? How can you strengthen operational and supply chain efficiency? What are the interdependencies between these factors and will you achieve an uplift in your multiple as a result?

It’s especially important to understand these factors when considering cross-border M&A and other more complex deals. What are the potential competition issues, for example, and could this require divestment of certain operations alongside the main acquisition?

The results from this holistic evaluation can help you to target investment where it can earn the best return by ranking your M&A priorities in order of value delivery and contribution to realising strategic objectives. What emerges might not be what you would intuitively expect. For example, we’ve seen instances where the share price impact from a particular divestment exceeds the value delivery from either organic or acquisitive growth.

Deal analysis can also be augmented by the use of new technology. Most M&A has historically been underpinned by a conceptual hypothesis, with more detailed analysis generally not possible until the target is ready to open its books. With the use of the latest analytics, it’s now possible to gauge M&A targets and portfolio choices much sooner, much quicker and with much greater precision than ever before.

Delivering with confidence
With a value creation blueprint in place, your business is in a strong position to secure investor buy-in, mobilise the organisation and begin to identify potential targets. It’s also possible to articulate a compelling investment story – our analysis shows that companies that can convey a clear M&A rationale can create more value from the deal.

Once the deal is agreed, the early identification and prioritisation of the key value levers mean that your business is ready to move straight away. The initial analysis also provides a baseline against which value realisation can be tracked, which helps to sustain momentum and strengthen accountability. When the integration begins, there is a heightened sense of purpose within the merged organisation, but the window is brief and will quickly come to close if the anticipated gains fail to materialise.

It’s helpful to assign a dedicated ‘Deal Value Architect’ to direct and co-ordinate the process right along the deal lifecycle. This approach doesn’t just ensure a strong underpinning for the strategic rationale, it also gives value delivery greater clarity, momentum and personal accountability.

Dealing from a position of strength
M&A is heating up and the price paid is rising. A holistic and systematic value framework can help you to maximise the opportunity by bringing all the deal strands together - strategic, operational and financial - to create a single view of the value creation journey ahead.

Contact us to find out how we can help you identify, create and exceed your value ambitions across your M&A lifecycle.

Our M&A report with Mergermarket, Creating value beyond the deal,uncovers how the most successful dealmakers have made M&A pay at every stage of their deal lifecycle. We share detailed insights on what makes an effective value creation approach, as well as insight into the first-hand experiences of executives on both sides of the deal. Download the report.