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Mergers and Acquisitions operational synergies
Perspectives on the winning approach
Why are mergers so often unable to achieve their desired results? While integration is not conceptually difficult, our experience indicates that it requires careful planning followed by an extremely meticulous focus on execution when confronted by the enormity of the effort.
- Planning, preparation, and execution
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Examining M&A activities that drive operational excellence
Facing skepticism and intense pressure to perform, managers overseeing the execution of these transactions tend to focus on quick wins. While supply chain efficiencies and operational improvements have a direct impact on the revenue, cost, capital expenditure, and working capital synergies that result from a merger, our experience indicates there are several missed opportunities in all phases of the merger process, from pre-deal planning through post-integration. Our research indicates three principal reasons why companies fail to achieve mergers and acquisitions (M&A) operational, supply chain, and manufacturing operations synergies.
Driving business growth and operational excellence
Recent research by Deloitte Consulting LLP revealed M&A-related activity as a primary driver of performance and contributor to shareholder value within the global automotive supply base. Yet, automotive suppliers don’t appear to be looking at M&A as a primary driver in delivering on their business objectives. Moreover, companies that do engage in M&A often miss opportunities to increase value because they fail to properly prepare, plan, and execute against the activities that result in operational excellence.
Why the paradox? And what can companies do to better prepare and execute against their M&A objectives?
To help executives think through these challenges, we have developed a series of five white papers that may help answer both the “why” and the “how” of M&A in the automotive industry.
Driving business growth and operational excellence serves as the prologue and seeks to answer the “why.” In other white papers in the series, we tackle “how” to properly plan, prepare, and execute M&A activity in the quest to seek operational synergies and excellence.
Principle reason 1
First, companies focus on capturing short-term financial synergies rather than taking a holistic view. By reducing the scope, they often overlook many “hidden” synergies and fail to create high performing supply chains with significant long-term upside that provide sustained value for customers and stakeholders.
Principle reason 2
Second, during M&A due diligence, companies overlook the overall business and operational “compatibility” of the two companies. Operational synergies are not synchronized with the customer/market needs of the combined entities, often requiring supply chain “rework” or savings “erosion.”
Principle reason 3
Finally, companies drastically underestimate the complexity, resources, communication, and management focus needed to execute a successful integration and realize expected synergies.