An Alternative Way to M&A: Separate Business-as-Usual from Value Drivers

June 29, 2021
4 Minute Read

It’s one of the most quoted statistics in business—and also one of the most daunting. Every year, as companies spend more than $2 trillion on acquisitions, the M&A failure rate still hovers between 70% and 90%, often because of acquisition management. An alternative structure is a better way forward.

It’s been said that history doesn’t repeat itself exactly—but it often rhymes. That’s definitely true with mergers and acquisitions. In the vast majority of cases, the acquiring company sets up an integration team, usually consisting of an Executive Steering Committee (ESC) and an Integration Management Office (IMO).

Follow a Different Path

So far, so good. Except in our experience of helping dozens of companies with M&As, this approach could fall short. In many cases, the integration team gets bogged down with the usual block-and-tackle details for operational success and never truly unlocks the value promised by the acquisition in the first place.

Our viewpoint? Depending on your acquisition, the traditional management office structure could be modified with the following alternative integration structure to achieve success:

Instead of the typical function-driven integration approach, this alternative structure prioritizes two teams.

  • Deal Value (DV): Focusing on realizing the strategic acquisition value drivers and fully achieving deal synergies.
  • Business-as-Usual (BAU): Managing the tasks needed to keep core operations running (e.g., payroll, benefit harmonization, system and business process consolidation, financial reporting, and facilities management). In addition, the core operations activities are aligned and tied to the deal value drivers.

From an organizational standpoint, these two teams have different missions—but, ultimately, they share the same objective: Work in collaboration throughout the entire process so the entire company captures the deal’s full value.

Start with a key question: ‘Why did we acquire this company in the first place?’

Perhaps it was to expand your product or sales pipeline. Or maybe to enter new markets, and obtain recurring revenue. Or acquire talent or new customers. Whatever the rationale, the deal value integration approach spotlights drivers by introducing a dedicated team focused on value realization.

At the same time—while not losing sight of the deal value—it’s equally important to integrate people, processes, and systems to ensure core business operating needs and build a foundation. Under this approach, the traditional integration teams would shift their focus from executing on the “functional checklist” of integration items to establishing a future business-as-usual (BAU) operation aligned to recognizing the deal value quickly and efficiently.

Yet by separating into two distinct teams, this alternative structure provides the needed attention to both high-priority initiatives simultaneously.

Understanding the Alternative Structure

Dependencies will inevitably exist between the Deal Value and Business-As-Usual teams. Without strong cross-team collaboration during planning and execution, integration would fail. Thus, the role of the Deal Value Office is hugely important to leading and driving a cohesive team.

This office not only includes a Deal Value Officer—think traditional Integration Management Officer—but an individual who pulls in the designated DV Lead and BAU Lead, and introduces a Change Management Lead to collectively sit in the box together to drive effective change.

How do these roles align with the new structure?

The entire organization is led at the top by the Executive Steering Committee (ESC). Like the traditional integration management office structure, the ESC includes executive sponsors from buyer and seller, business unit leaders, and other key leaders, if applicable.

The DVO head is responsible for driving the day-to-day strategy, planning, and execution management. The DV and BAU heads serve as project leads for their respective teams and are accountable for ensuring their respective teams are planning and executing against their respective initiatives.

The added Change Management Lead identifies, addresses, and eliminates potential roadblocks to ensure integration initiatives can be achieved.

We’ve recently noticed an increasing trend toward enhancing both employee and customer experience throughout the integration journey. In order for key stakeholders to benefit from the integration experience, more and more companies are recognizing the importance of including Change Management in their overall planning and processes.

Block-and-tackle doesn’t win games—scoring does. You need both.

The success of this alternative structure can only be realized by once again answering the question posed above: Why did we acquire this company in the first place? All too often, acquiring companies focus on the minutiae of the process instead of the magnitude of the big picture.

Serious mistake. This is especially true if you’re a publicly held company. Analysts and investors are going to hold you accountable to the promise of unlocking value—not the power of checking boxes. Once your focus is clearer, creating a deal value approach becomes easier and the rest flows naturally.

A Real-world Example

Here’s one example: A major tech firm implemented this alternative approach and unlocked the value they were looking for. How? Instead of following the usual 1,000+ line integration project plan, we helped them develop a robust value-integration approach, including the implementation of a centralized M&A enablement tool that gave them greater line-of-sight into the portfolio acquisition projects as well as the ability to better track progress and deliver on deal value.

The results so far have been clear. Our client was intentionally focusing on the development of training programs and management tools to upskill their integration workforce. The Corporate Development Integration group developed workforce strategy and adoption plans to ensure smoother transitions to new processes and operating models. Furthermore, in addition to the technical and soft skills, this company is also delivering workforce “behavior” enhancement training to accelerate change management adoption.

Getting That Edge

Finally, all told, we’re also realists. The alternative structure we’ve outlined above will likely not bring down that oft-quoted 70-90% failure rate significantly. Fair enough. But on an individual level, when you already know the odds are against you, any advantage can help. Creating a more value-driven integration function can give you just the advantage you need in helping make your next acquisition a success. You’ve made the investment. Now realize the return.

We can help with a wide variety of Transaction Advisory services and discuss whether a Deal Value Office approach is right for your company’s acquisition work.

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John Kim

VP, Transaction Advisory Services
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