The announcement of a merger deal is not always greeted warmly by investors.
The current prevailing view is that most mergers fail to deliver on their
strategic promise and can actually wreck shareholder value. Yet with
increasingly globalised markets M&A is still a viable route to growth,
providing that it's done right.
Managing a successful merger transaction, paying the right price and
ensuring integration of the target company runs smoothly and fulfills the
rationale for the deal are all aims any company embarking on M&A should
have. The report Successful Dealmaking, produced by the
M&A Research Centre (MARC) at Cass Business School provides insights into
how these aims can be achieved, and into what distinguishes successful
This report is based on results from two recent studies conducted by MBA
students at Cass. The first looked at 70 large acquisitions by UK and US
companies between 2007 and 2011, comparing those that created shareholder value
with a matched sample of deals that destroyed it. The second study surveyed 31
professionals on their views of the role of HR in M&A transaction
The analysis highlighted three main areas for focus during an M&A
Having a clear strategic intent and communicating it openly
Successful acquisitions were often made to enhance or add capabilities to
existing systems or to increase access to R&D or technology. These
represent clear strategic intent. In addition, successful acquirers tended to
share detailed information about what their plans would be once the deal had
Employing good diligence and negotiating skills to avoid overpayment
The analysis showed that unsuccessful acquisitions usually came at a
price premium of 45% on average. Successful acquisitions were on average at a
premium of 31%.
- Understanding the importance of key operational staff retention and
involving HR early on in the deal process Retention of key operational
staff can be a very important factor in achieving a successful acquisition,
whereas senior executive teams are comparatively more disposable.
Indeed, the study demonstrates just how important HR issues are in
determining the success or otherwise of the deal. A survey of company
executives gave the overwhelming view that a HR component should be involved in
a M&A bid as early as the targeting stage. HR teams can help define
post-completion reward systems, anticipate and resolve cultural conflicts
across geographical or ideological lines, and all the time maintain open
communication to the employees affected. These can be crucial to ameliorating
staff anxiety, as when people are fully informed of what is happening and how
it affects them, they are more willing to accept change.
The full report was recently published by MARC (Cass' M&A
Research Centre) and is available for free download here.