From Hay Group:  

Winners and losers in the M&A game

After a period in the doldrums, M&A activity is beginning to bounce back, with rich rewards for those who make mergers and acquisitions work. So what should companies looking to conduct a merger or acquisition in a challenging economic climate be focusing on to ensure success?

Companies tend to concentrate on integrating tangible assets – such as IT systems – and on achieving cost synergies, to the detriment of their customers and this tendency is even stronger during tough economic conditions. The balance between these issues and the integration of intangible capital, such as people, processes and structures is often not planned for far enough in advance during the M&A process. Knowing where to start is half of the battle. For a merger to deliver on its promise, organizations must address these issues – while at the same time managing the risks of integration and extracting the maximum value from it. It’s a difficult balancing act.

Critical factors that help M&A succeed:

  • striking the right balance between the tangible and intangible capital – this means taking into account organizational capital (including governance and the operating model), relational capital (including client relationships and other stakeholders), and human capital – of the companies to be merged – right from the start.
  • the impact of leadership – putting the new top team of the merged organization in place as soon as possible, so they can begin to live the new vision and values. For help identifying the right leaders to drive your business forward, see our leadership and talent pages

Key facts

  • Only nine per cent of business leaders think their deal fully achieved its original objectives.
  • 54 per cent of business leaders state that neglecting to audit non-financial assets increases the danger of making the wrong acquisition.
  • Companies appointing a new management team as early as due diligence stage are more than twice as likely to reach full integration within a year.
  • Executives do not spend enough time on the intangle capital integration: only 25 per cent of due diligence time is allocated to auditing intangibles.

For further information, including a linke to download the whitepaper (registration required), click here.

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