Pay a visit to the M&A News section on Label and Narrow Web’s website and you’ll find out the latest mergers and acquisitions in the industry. You’ll probably read how each party envisions tremendous synergistic opportunities, and that the future looks very promising.
But will these new entities succeed, or will they become a part of 70-90% of M&As that fail?
I can’t give you a definitive answer, but I can provide you with the criteria for what it will take for these mergers and acquisitions to succeed:
• It has to be a win-win situation. An M&A is not a win-lose proposition. In order for anyone to win, everyone has to win, and that has to be the focus. If you enter into an M&A thinking this is your ticket to easy street, think again. The truth is, your work has just begun.
• It has to include a solid transition team. Too many M&A failures can be linked to the absence of a transition team, either before or after the transaction. You must have people ready to help manage the new culture, operations and strategic initiatives.
• It has to include shared – and honest – financials. It’s critical the two companies work together and base their decisions on a foundation of financial data. That means sharing accurate financial metrics. If either company hasn’t been entirely upfront with their disclosures throughout the process, the long-term success of the M&A is in serious jeopardy.
• It has to include the current team. I talk to my clients about financials a lot, but it’s always the qualitative factors that dictate the success of an M&A. Can the two cultures merge and work together? That depends entirely on how well the management team can communicate the shared goals and foster a cohesive process that integrates their respective talents.
• It has to include a series of outside advisors. Earlier in this post I alluded to the need for a win-win situation. That requires integrity from both parties, and the best way to ensure that occurs is with the help of an outside team of advisors. I’ve used everything from independent appraisers to corporate psychologists to provide me with objective overviews of companies. It’s wise to include professionals who don’t have a vested interest in the process.
If you’re interested in an M&A, I strongly urge you to study the M&A news and become familiar with the types of transactions that occur. Bookmark recent deals, and then check back on them 12-14 months down the road. If they’ve failed, I can guarantee some of the culprits I mentioned above are part of the reason.