M&A | Mergers and Acquisitions | PremiValor Consulting

M&A

Mergers and Acquisitions

PremiValor Consulting has been involved in several mergers and acquisitions (M&A) processes, either through selling mandates or through acquisition mandates.

Why M&A?

Different forms of synergies

Growth / Diversification

Strategic realignment

Hubris

Undervalue assets

Why M&A?

Managerialism

Tax issues

Market power

Misvaluation

Value creation

Why do M&As Fail?

Limited involvement of the owner

Incorrect valuation of the transaction

Faults in the integration process

Differences between business cultures

Lack of resources needed for integration

High recovery costs

Mistakes in negotiation

External factors

Lack of contingency plan

Why do M&As Fail?

Studies conducted on the outcome of M&As show that 30% of them fail within three years

The Importance of business culture compatibility

Culture consists of the long-standing, largely implicit shared values, beliefs, and assumptions that influence behavior, attitudes, and meaning in a company (or society).

Culture affects various corporate aspects such as:

Decision-making style

Consensus vs top-down

Leadership style

Dictatorial vs consultative

Ability to change

Willingness to risk new things vs maintaining current state

How people work together

Formal structure and role definition vs informal relationships

Beliefs regarding personal success

Focus on individual performance vs focus on teamwork

The due diligence process

During the due diligence process the focus is usually on measurable metrics, such as financial data and legal questions. Only after the transaction is completed is the management team concerned with cultural compatibility.

Most managerial teams address this problem by defining a set of desirable cultural attributes and then encourage employees to adopt these attributes in their daily tasks. However that comes with the time pressure to deliver results to shareholders.

This pressure for results does not afford the time for a detailed cultural diagnosis or a long-term culture change project with uncertain prospects of achieving the desired goals.

This can be tackled by a more balanced approach, identifying the high-risk points and working with employees to mitigate the impact of these points.

There are several strategies to put this approach in practice:

Make sure that culture a major component of the new management’s plan

Consider the strengths of both existing cultures, not just the weaknesses

Identify who is responsible for corporate culture and have them report to senior management

Implement a decision-making process that is not affected by cultural differences

Ensure that the cultural work focuses on tangible and measurable components

Build an employee brand with a view toward how it will be understood by employees

Put people with knowledge and experience in culture change on teams that define the key strategies in the new organizational model

Premivalor M&A experience

Sell-side advisory

We have extensive experience in the selling process of companies and businesses, supported by a senior team that facilitates trust between parties and the identification of the right buyer.

Buy side advisory

We help clients address the most important strategic decisions when it comes to buying a company or business ensuring sound growth strategies, including the financing operation. Our senior experts take you smoothly through the full scope negotiation and decision process, leading the planning, execution and deal-close of the transaction.