Only 21% of dealmakers consider their deals to be extremely successful: PwC Post-Merger Integration Survey 2017

Nov 10, 2017

  • 70% respondents felt that the integration process should ideally commence during the negotiation or due diligence stage
  • 68% respondents believe clear and regular communication with internal and external stakeholders is a key integration focus area
  • 62% respondents rank synergy realisation as the top measure of deal success

Mumbai, November 10, 2017: While assessing the success of their deals, 63% of respondents believed that their deals were only moderately successful and not able to achieve their full potential.  The respondents also identified synergy realisation, return on investment and gains in market share as the top three performance indicators for measuring deal success.

These findings are part of the PwC Post-Merger Integration Survey 2017 titled Making M&A successful.” According to the report, 40% of respondents said they did not have any formal approach towards ensuring synergy realisation, while 50% said that they tracked synergy metrics with the functional owners but in an ad-hoc manner. Even in the case of executives who had synergy realisation as the key success metric, only around 30% had tracked the entire process on a regular basis through a formalized process established with the owners of the respective metrics.

Commenting on measuring deal success, Yashasvi Sharma, Partner & Leader – Delivering Deal Value, PwC India said, “The success of a deal is defined by the achievement of strategic, financial and operational objectives. However, the integration process—an important lever to achieve these goals—often does not find adequate space in the priority calendar of dealmakers, resulting in less than optimum value realisation. Dealmakers need to adequately assess, analyse and determine synergy levers as well as factors that may erode value. Once the identification process is complete, concrete steps need to be taken to realise synergies and streamline operations to avoid pitfalls. If you are going to get just two things right in the integration process, let those be people and culture, and technology integration.”

The survey respondents identified employee expectations, organisational culture and IT integration as the top factors responsible for integration complexity. The report highlights the fact that while dealmakers conduct thorough financial and tax due diligence on targets, operational areas such as sales, operations, HR and IT are typically covered only at a high level. The survey results show that more than 30% of respondents did not conduct comprehensive due diligence in the abovementioned areas. The lack of proper diligence and detailed understanding of the target’s operations, increases the complexity and delays in the integration process.  

“Deal teams, generally globally and more so in the highly competitive Indian market, especially with PE money chasing good key assets, are often stretched to close deals. However, buyers are increasingly seeing merit in involving integration teams early on in the process and thinking through the key integration issues before they sign on the dotted line,” said Sanjeev Krishan, Partner & Leader, Deals, PwC India.

Top factors that positively influence integration:

  • Clear and regular communication with internal and external stakeholders: Transparency and continuous communication highlighting the impact of the transaction to internal stakeholders, including employees and board members as well as external stakeholders, go a long way in building trust.
  • Involvement of senior management in the integration team: Senior management is often not involved in integration activities and is hence unable to provide direction to the integration exercise.
  • Dedicated integration team: Keeping track of progress and coordinating with multiple teams ensures that management is aware of roadblocks and can take course corrective measures when required.
  • Fast pace of integration, with defined roadmap and achievable milestones builds momentum: Setting targets, prioritising tasks, identifying areas for quick wins and allocating responsibilities are essentials of integration planning.

About the survey

PwC’s Delivering Deal Value team surveyed the senior management of Indian companies who had been active in M&A transactions and had played a key role in integration efforts. The survey responses were obtained either through an online survey questionnaire or through in-depth interviews conducted with the respondents.

The survey respondents, who had first-hand knowledge of the challenges and issues faced during the integration process of their deals, took valuable time out to share their experiences and knowledge about deal integration. The survey respondents were a mix of CXOs and M&A, strategy and operations heads of companies across various industries, which have undergone a merger or acquisition in the recent past.

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