First, let’s classify the definition of “fail.” I’ll refer to an analysis conducted by the Deloitte Review. They looked at 400 M&A transactions in an attempt to determine how successful the transaction had been. heir findings revealed:
• 27% of the deals were classified as high-performing growth (acquirers able to consistently grow the combined businesses faster than the separate companies)
• 45% were medium-performing growth (acquirers able to grow the business, but inconsistently or at a slower rate than prior to the M&A)
• 28% were low-performing growth deals (acquirers could only produce flat or declining revenues)
The Deloitte Review pieces warrants a read and offers up some key suggestions regarding a successful M&A, so check it out, but I’d like to share the critical characteristics needed to break that 27% mark:
1. Ensure it’s a win-win situation for both parties. This is not a winner-take-all transaction. An M&A should be designed for the long-term strategic benefit of both parties. Design it any other way and you’re destined for failure.
2. Plan for the M&A thoroughly. Many companies rush into these types of transactions – most primarily do it to save a sinking ship. An M&A is not a quick fix. Approach it that way, and you’ll soon have a disaster on your hands.
3. Build in a transition team. A transition team is critical for an M&A to work, as it will help ensure the successful transition before, during and after the deal closes. Not only that, but it allows you to focus on keeping your business strong during the 18-24 months it takes for a typical close.
4. Put a contingency plan in place. It’s not uncommon for an M&A to fall apart during the negotiations. Do you have a Plan B in place? And what happens with issues after the close? Make sure you’ve covered all the bases.
There are a multitude of other critical strategies essential for the successful M&A to occur. The four tactics I’ve listed here should top your list if you plan on making M&As a part of your long-term strategic growth.
*The numbers are not specific to label and narrow web, and were conducted from 2001 - 2007, but the trending by and large is consistent throughout the financial marketplace.
Rock LaManna helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. He is President and CEO of the LaManna Alliance, and provides guidance on how to grow a printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan. Rock can be reached by email at Rock@RockLaManna.com.