2. M&A Volumes go in Waves…
and we're now on the downward slope
Source: Thomson Financial
2
3. Most acquisitions historically have been failures…
1987
McKinsey
116 acquisitions
61% failed
.
Porter
1996
Mercer/
Business Week
150 deals
57% failure rate,
30% had 'substantial' losses
.
Economist
150 acquisitions
70% failed to meet expectations
.
McKinsey
160 acquisitions
Only 12% accelerated their growth
1997
Sirower
168 mergers
Only 20% return in 4 years
1998
A. T .Kearney
115 mergers
58% added no value
1999
McKinsey
2001
KPMG
118 acquisitions
70% created no value / 31% destroyed value
2004
BCG
277 deals
64% destroyed value for acquirers’
shareholders
56% of all acquisitions get sold off
77% fail to yield expected synergies
3
4. Blue – Non CFO – CFO survey
Why do M&A deals fail?
Rank
Top 10 Pitfalls in Achieving Synergies
Negative
Impact
1
Incompatible cultures
5.60
2
Inability to manage target
5.39
3
Unable to implement change
5.34
4
Synergy non-existent or overestimated
5.22
5
Did not anticipate foreseeable events
5.14
6
Clash of management styles/egos
5.11
7
Acquirer paid too much
5.00
8
Acquired firm too unhealthy
4.58
9
Need to spin off or liquidate too much
4.05
10
Incompatible marketing systems
4.01
Note: Survey of Forbes 500 CFOs. Assessed on a scale of 1 to 7, where 7 is high.
4
5. M&A Paradox
Most mergers fail, but few companies succeed without acquiring or
merging.
–
–
–
Can you be a large organisation without having made acquisitions?
Is organic growth sufficient to become a leading player?
Is there a 'best time' to make acquisitions?
Management’s challenge:
'How can you reconcile the low odds of deal success with
the need to incorporate mergers into the growth strategy.'
Or today…
'How to make deals successful NOW when the
market's going down?'
5
6. The current merger wave is different…
1987
McKinsey
116 acquisitions
61% failed
.
Porter
1996
Mercer/
Business Week
150 deals
57% failure rate,
30% had 'substantial' losses
.
Economist
150 acquisitions
70% failed to meet expectations
.
McKinsey
160 acquisitions
Only 12% accelerated their growth
1997
Sirower
168 mergers
Only 20% return in 4 years
1998
A. T .Kearney
115 mergers
58% added no value
1999
McKinsey
2001
KPMG
118 acquisitions
70% created no value / 31% destroyed value
2004
BCG
277 deals
64% destroyed value for acquirers’
shareholders
2006/7
Cass / Towers Perrin
1,400 acquisitions
‘Only’ 47% destroyed value since 2003
2007
McKinsey
1,000 deals
58% overpaid since 2003…
but since 2003 deals created value
56% of all acquisitions get sold off
77% fail to yield expected synergies
6
7. And 2008 looks to be even better!
Short term Shareholder Return
7
8. What has changed in the past several years?
Drivers
Most organisations are
now far more disciplined
and focused in their
transactions than ever
before.
In particular, we have
noted, and confirmed by
live interviews, the
following recurring
themes:
Get
Culture Right
Improved
Deal
Selection
Razor Sharp
Focus on
Integration
8
19. Post Merger Integration
‘A wise person once said that a beautiful marriage
is one in which two people become one. The
trouble starts when they try to decide which one.’
19
This is what CFOs are saying – Survey of Forbes 500 CFOs conducted in the mid 1990’s
Indeed, most past studies have shown that the most common M&A pitfalls are people related
We feel strongly that the companies have learned from the past, and now invariable address people issues head-on.
In particular, from what we have seen working with all our clients, and corroborated by a series of interviews, we have found these 3 key areas of learning
