Swiss companies are mature acquirers but not mature integrators
New M&A study by Deloitte in Switzerland and University of St. Gallen
Zurich, 4 February 2015
The Swiss M&A market witnessed its highest rise in activity since 20081. The transaction volume increased from 27 billion CHF in 2013 to 178 billion CHF in 2014. The new joint study by Deloitte in Switzerland and the University of St. Gallen investigates the challenges and opportunities of serial acquisitions in Switzerland. A key finding: Mergers often fail to meet expectations.
In the joint study by Deloitte in Switzerland and University of St. Gallen, 25 Swiss ‘serial acquirers’ – corporations having conducted more than eight acquisitions in the last twelve years and with revenues ranging from CHF 1 bn to CHF 60 bn – were interviewed. The study finds that high acquisition volumes strain managerial capacity, increase coordination demands and can require fundamental organizational restructuring.
1Information based on Mergermarket
Companies prepare for deal, but not for integration
Only 23% of the companies interviewed stated that their company have both a systematic approach and tools at their disposal for the post deal integration of a newly acquired company. Also, only 11% said their company had a ‘formal solution’ in place addressing the risk of not having a structured integration approach.
Anna Samanta, Corporate Finance Partner at Deloitte in Switzerland, comments: “A large majority (73%) of serial acquirers in Switzerland have understood the importance of systematic processes to successfully complete the pre-deal phase of an acquisition. However, the biggest value losses or gains are incurred during the integration of the newly acquired firm and its employees. The integration process is often conducted in ad-hoc and not well-prepared manner.”
When the various deal-making and integration teams are not aligned, achieving the deal value may be at risk: According to the study, only around one third (31%) of companies have formal solutions in place that address the collaboration between their deal-making team and their integration team. Anna Samanta explains: “To have the integration team involved early on is key for the robustness of a synergy case and the success of achieving the deal promise.”
Need for the ability to digest
Companies need to monitor their deal pipeline closely, as there is a limit to digest acquisitions, and small deals often generate the same or at least a similar workload as larger deals. 67% of companies would consider postponing or even dropping a deal if there is not enough management attention in place. Especially serial acquirers need a strong and experienced team covering the back office functions (e.g. IT, HR, Finance) and need to have well-defined, well-maintained processes and systems ready to digest multiple acquisitions.
Only 21% of all companies measure synergies
Possible synergies between two merging companies need to be consequently tracked. But only 21% of all serial acquirers, mostly large and centralized companies, fully measure all of possible synergies. While cost synergies are easier to track, carefully defining and tracking growth help secure the deal value.
Anna Samanta says: “Serial acquirers benefit from rigorously tracking synergies by improving their future ability to better value deals. Serial acquirers that not only set clear synergy targets, but also link those synergy targets to operational integration plans are those that secure the deal value.”
About the Deloitte and University of St. Gallen “Serial Acquirers” study
This study is based on senior management interviews at 25 Swiss ‘serial acquirers’, whose revenues range from CHF 1 to 60bn, conducted between June and November 2014. Corporations are defined as serial acquirers when having conducted more than 8 acquisitions over the last 12 years. The firm sample consists of blue-chip multinationals and large domestic firms, operating in industries such as transportation, life sciences, retail, financial services and manufacturing.
You can download a copy of the report here.
About Deloitte in Switzerland
Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and corporate finance. With approximately 1,300 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 210,000 employees in more than 150 countries around the world.
Note to editors
In this press release references to Deloitte are references to Deloitte AG, a subsidiary of Deloitte LLP, which is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.com/ch/about for a detailed description of the legal structure of DTTL and its member firms.
Deloitte LLP and its subsidiaries are leading business advisers, providing audit, tax, consulting and corporate finance services through more than 14 000 exceptional people across the UK and Switzerland. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel.
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The information contained in this press release is correct at the time of going to press.