Seven Golden Rules To M&A Success

Increasing shareholder value is one of the key reasons to pursue a merger or acquisition, yet only about one third of the largest deals in the last couple of years resulted in increased value.

A recent study by KPMG uncovered some interesting facts about successfully increasing shareholder value following a merger or acquisition.

It found that:

  • The more experience a company had in acquisitions did not make much difference on its ability to increase value.

  • 35% of US companies derive value from a merger or acquisition. European counterparts only increase value 24% of the time.

  • Companies are most likely to succeed in increasing shareholder value by following these seven key steps:

    1. Early action - companies must institute processes and systems early on in the process.

    2. Board of Directors Involvement - a Board member must champion the M&A process resulting in more focused leadership and assistance with buy-in from others

    3. Pre-bid value assessment - a thorough understanding of the price range of the target company and the drivers of value that the company brings to the deal

    4. Formal transaction process plan - development and approval of a clear plan setting out roles and responsibilities for any transaction, before any assessment is made of a target company

    5. Ongoing process manager involvement - appointment of a dedicated driver of the entire process from the early stage discussions

    6. Process manager empowered with a wide-ranging role - this position needs the latitude in carrying out responsibilities ranging from risk management, deal assessment, negotiation and implementation

    7. Independent assessment of post-deal implementation - get a second opinion and have external advisers assess the strategy and execution of the deal

The survey concluded that companies that succeed in increasing shareholder value in a merger or acquisition recognize the importance of advanced planning, strategic assessment, due diligence, and an agreed-upon detailed blueprint for execution.

Planning is key. Simply executing the deal used to be the main focus and emphasis of management. Implementation, integration and carrying out the true potential of the deal now has the appropriate focus of tuned-in management and Board leadership.


Analysis of survey results reported in Directorship Magazine Jul/Aug 2001 by Donald C. Spitzer, chairman of the International Transaction Services Steering Committee and national partner in charge of KPMG's Global Financial Strategies(SM) practice. He is also partner in charge of Transaction Services in the US. He joined KPMG's Fort Worth, Texas, office in 1971, was named a partner in 1982, managing partner in 1991, and partner in charge of Financial Services in the Southwest Area in 1994.

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