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Mergers and Acquisitions (background) Prof Scott Moeller

Mergers and Acquisitions (background) Prof Scott Moeller. Tailored learning Cass Executive Education bespoke programmes. M&A Volumes go in Waves… and we're now on the downward slope. Source: Thomson Financial. Most acquisitions historically have been failures….

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Mergers and Acquisitions (background) Prof Scott Moeller

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  1. Mergers and Acquisitions(background)Prof Scott Moeller Tailored learningCass Executive Education bespoke programmes

  2. M&A Volumes go in Waves… and we're now on the downward slope Source: Thomson Financial

  3. Most acquisitions historically have been failures… 1987 McKinsey 116 acquisitions 61% failed . Porter 56% of all acquisitions get sold off 1996 Mercer/ 150 deals 57% failure rate, Business Week 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 77% fail to yield expected synergies 2001 KPMG 118 acquisitions 70% created no value / 31% destroyed value 2004 BCG 277 deals 64% destroyed value for acquirers’ shareholders

  4. Why do M&A deals fail? Negative Impact Rank Top 10 Pitfalls in Achieving Synergies Incompatible cultures 5.60 1 2 Inability to manage target 5.39 3 Unable to implement change 5.34 4 Synergy non-existent or overestimated 5.22 Did not anticipate foreseeable events 5.14 5 6 Clash of management styles/egos 5.11 7 Acquirer paid too much 5.00 8 Acquired firm too unhealthy 4.58 4.05 9 Need to spin off or liquidate too much 4.01 10 Incompatible marketing systems Note: Survey of Forbes 500 CFOs. Assessed on a scale of 1 to 7, where 7 is high. Blue – Non CFO – CFO survey

  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?'

  6. The current merger wave is different… 1987 McKinsey 116 acquisitions 61% failed . Porter 56% of all acquisitions get sold off 1996 Mercer/ 150 deals 57% failure rate, Business Week 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 77% fail to yield expected synergies 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

  7. And 2008 looks to be even better! Short term Shareholder Return

  8. Drivers Get Culture Right Improved Deal Selection Razor Sharp Focus on Integration What has changed in the past several years? 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:

  9. Three essential Components to a Merger Deal

  10. M&A: The Seven Deadly Sins Source: financialworld.co.uk, March 2007

  11. Good and bad reasons for doing deals

  12. Criteria for Target Assessment

  13. Alternatives to M&A

  14. Total Deal Cost

  15. Public Deals: 6 Step Process

  16. Simplified Deal Process

  17. Due Diligence ‘Know thy enemy and know thyself; in a hundred battles you will never be in peril.’ Sun Tzu 400-320 BC

  18. Due Diligence Key success factors

  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.’

  20. Change or Preserve? High Change in Target Low High Change in Acquirer

  21. Focus of Integrations Source: Mergermarket / CMS Cameron McKenna, Feb 2007

  22. LEARN CIA principle

  23. Poor communication (use of "killer" phrases)highlights poor underlying strategy

  24. Two related "killer" phrases

  25. More communication indicators of poor implementation

  26. Summary: Key Success Factors in Post-Merger Integration

  27. Mergers and Acquisitions

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