At last, a clear view of what makes some deals succeed and others fail

February 25, 2019

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by Chris Temple UK Value Creation in Deals Leader

Email +44 (0)7715 704870

As disruption mounts, the potential benefits of mergers and acquisitions (M&A) have never been more significant – a chance to not only build scale, but also bring in top talent, transform technological capabilities, invest in new markets and reinvent business models. Successful divestments could also be game-changing by enabling businesses to bolster finances and refocus resources on growth opportunities.

Yet M&A can also be a damp squib, delivering little or no discernible uplift despite all the effort and investment. It could even destroy value and tarnish CEO reputations.

Today’s high multiples make it harder to make M&A pay. Every last bit of value needs to be extracted to secure the payback. Opportunistic deal-making becomes that much harder when there is little or no margin for error.

Little wonder then that a common question I hear from clients is “why do some deals succeed in creating value and others fail?”

Rating the performance of every major deal
We at PwC wanted to get under the bonnet to answer this question and find out what really makes the difference.

To find the answer, we’ve been working with Mergermarket and the Cass Business School to analyse the post-deal total shareholder return from all the major global transactions from the past eight years. To determine why some deals perform better than others, we also interviewed 600 corporate executives and our PwC deals leaders.

Foundations for accretion
What we’ve discovered is quite fascinating and often surprising. What particularly struck me is how many businesses thought they’d created value from the deal when they’d actually ended up underperforming their industry peers. What also comes through strongly is the importance of sticking to the strategic intent, creating a clear value creation plan and putting people and culture at the heart of the deal. It really is so important to understand from day one how value will be created at every stage of the deal.

To help ensure your deal creates value, download our newly published report, Creating value beyond the deal now. I recommend this as a must-read, not just for strategic deal-making teams, but also CEOs, CFOs and shareholders. I’m also really interested to hear your feedback and experiences.

by Chris Temple UK Value Creation in Deals Leader

Email +44 (0)7715 704870