Posted: Nov 01, 2019 7 min. read

Four M&A actions to help you cut through complexity

A new deal’s on the horizon. Or you might be in the midst of one. Informed decisions need to be made quickly. And risk and opportunities need to be appropriately identified. For many across the M&A landscape, knowing what action to take at every twist and turn can make or break a deal. 
 
How do you know when it’s right? Here are four fundamental actions to drive M&A success:
 
Action #1: Get strategic about your growth strategy  

Organisations that are the most effective across M&A have a robust growth strategy in place before executing M&A activity. This involves identifying firm-wide objectives and considering whether these can be achieved through M&A.

During the development of your M&A growth strategy, it’s vital to prioritise key elements. Our Global M&A report: The state of the deal – M&A trends 2019, highlights that the three most critical aspects of a corporation’s M&A strategy are expanding bases in existing markets, expanding and diversifying products and services and acquiring technology. [1]

It’s a focus on understanding market opportunities, ensuring that acquisition and corporate strategies are aligned, and creating the optimal culture and business model that drives these outcomes. Having the right strategy in place is key, especially against a backdrop where 30 percent of CFOs expect to see an increase in their business’s M&A activity over the next 12 months. [2] 

Action #2: Prioritise value creation 

Given the frenetic pace of M&A activity, decisions are often made under significant time pressure and reactive in nature. The focus on getting the deal done can crowd out the focus on maximising value. There needs to be a sharp focus on prioritising value creation at every step – in order to unlock potential. 

Applying a value creation mindset to all aspects of a transaction is challenging. It pays to make sure the team is crystal clear on the strategy and value creation thesis. Currently there is a strong M&A trend toward diversification, as highlighted by our CFO Sentiment report which found that 32 percent of CFOs are looking to use M&A to diversify products and service to meet changing customer demand and reduce risk across market segments. [3]

Prioritising value creation requires the right tools and capabilities to understand the drivers of value. This is a holistic approach that goes beyond assessing financial trends and data. You have an enormous advantage if your team has a deeper understanding of how an operating model translates inputs, activities and assets into value. Your team will be better placed to both negotiate a more attractive deal and deliver a more valuable and issue free transition, including all the separation, integration and/or transformation activities.

Action #3: Have insights at your fingertips – with data driven decisions

Let data lead your transaction – by harnessing the power of data analytics for more informed decisions. 

Applying focused data analytics as part of a transaction can provide you with insights and answers to validate the key deal hypotheses:

  • What are the early stage commercial and operational deal breakers? 
  • Is the target positioned strongly within the industry relative to its competitors?
  • Are the growth projections realistic compared to market fundamentals?
  • What is the operational and financial scope of the business to be divested?

Undertaking a data driven approach to M&A will provide faster insights and allow all parties working on the transaction to de-risk high level assumptions and get to fact based insights. One common area of analysis is validating customer and revenue synergies. This approach allows for thorough planning on how an acquisition will be revenue accretive and ensure segments are clearly aligned and identified. Several CFOs are using M&A as a means to acquire a larger customer base, both domestically and abroad. Implementing these in-organic strategies require a deep dive into customer data. 

On the sell-side, data analytics plays a key role in assessing a company’s portfolio and forming a view around whether a divestment approach might be the right course of action. M&A isn’t all about expanding, with almost one quarter of CFOs expecting their company to divest a business unit in the next 12 months. The key motivation for expected divestitures is either a reshaping of the portfolio or removal of non-core components. [4]

Action #4: Partner with an integrated team to drive a seamless approach 

Having a lead navigator and end-to-end team can make all the difference when developing and implementing strategy, identifying opportunities, handling risks and exploring value creation potential. No two deals are the same – it’s not a one size fits all approach. 

Working with a team that brings a diversity of skills and experience – locally and globally – to the deal table is paramount. As reinforced in our recent Building the Lucky Country report: The path to prosperity: Why the future of work is human, jobs will increasingly need us to conduct work of the heart. [5]  Having the right team to implement the right actions with the right judgement and skillset is critical. 

The result

From strategy development to value creation, the use of analytics to a proactive / holistic approach and more, every aspect of an M&A transaction is vital. When it comes to driving the best possible outcome, the difference between where you are now and where you need to be comes from action. 

Are you taking the right action for your M&A transaction? Explore our M&A Advantage hub for more insights.

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[1] The state of the deal: M&A trends 2019 at https://www2.deloitte.com/us/en/pages/mergers-and-acquisitions/articles/ma-trends-report.html#infographic

[2] CFO Sentiment, Edition 7, Global headwinds take their toll, H1 2019 at https://www2.deloitte.com/au/en/pages/about-deloitte/articles/cfo-sentiment-edition-7.html

[3] Ibid.

[4] Ibid.

[5] Building the Lucky Country, Edition 7, The path to prosperity: Why the future of work is human on page 13 at https://www2.deloitte.com/au/en/pages/building-lucky-country/articles/path-prosperity-future-work.html

More about the authors

Peter Forrester

Peter Forrester

Managing Partner, Clients, Industries & Markets

Peter is the Managing Partner, Clients, Industries and Markets for Deloitte Australia. He is a member of Deloitte Australia’s Executive Leadership Team, the Executive Sponsor for the Tax & Legal Busin

Ian Turner

Ian Turner

National Leader, M&A

Ian is the national leader of M&A and a member of the global firm’s M&A executive committee. He specialises in advising corporate clients and financial sponsors in capital market transactions providin