How M&A can fuel and serve as a catalyst to your transformation journey has been saved
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How M&A can fuel and serve as a catalyst to your transformation journey
Acquisitions and divestitures as a catalyst
M&A deals typically roll out sequentially: Transaction close first, business transformation second. Addressing both simultaneously can drive greater and more sustainable long-term value creation.
Transforming while transacting
Most M&A deals are implemented in two steps:
- Step one: Stabilize an organization after an acquisition, merger, or divestiture.
- Step two: Transformation—reimagine, optimize, and rightsize operations and systems to drive growth and profitability.
This two-step approach is tried and tested, but has drawbacks: the potential to prolong timelines, compromise value realization potential, and create competing agendas and governance structures. It can also deplete deal energy and excitement while leaving parts of the organization wholly unchanged and far from optimized.
Leading organizations and forward-thinking executives are now embracing a transform-while-transacting approach, one in which business transformation is pursued simultaneously with M&A transactions, using the aperture and energy of an M&A deal to redefine the organization.
The transform-while-transacting paradigm can drive faster, more significant, more sustainable value creation. In this report, informed by Deloitte’s experience with clients on more than 10,000 transactions, we explore both the promise and the practical considerations that surround this approach to M&A.
The catalyst: Transforming while transacting
The transform-while-transacting paradigm
The transform-while-transacting approach can help accelerate changes to business and operating models, readying the combined organization to more effectively compete. It can also increase the likelihood of deal success in an acquisition or divestiture.
Timeline delays and failure of business or operational model changes are potential risks—exacerbated when planning or execution is rushed—but these risks can be mitigated through strategic clarity at the outset and effective prioritization of business transformation initiatives.
Not every transaction should follow the transform-while-transacting approach. When there is an opportunity to create value, a need to reshape and advance capabilities and operations, and an appropriate window to effect change, companies should strongly consider how to best take advantage of the transformational opportunity—and make it count.
If the model makes sense, the right timing should be informed by purchase price, speed of transaction close, whether the takeover is hostile, whether there’s a need for transitional service agreements, and the extent to which the organizations rely on digital capabilities.
The best time to start a transformation process comes before a deal is even signed. Starting early can help foster an expanded view of value creation opportunities and possible transformational outcomes and benefits. Priority should be given to revenue and customer facing processes and the operational support for these processes across supply chain, IT, and finance. This allows sales teams to do what they do best: sell and close deals.
If the model makes sense, the right timing should be informed by purchase price, speed of transaction close, whether the takeover is hostile, whether there’s a need for transitional service agreements, and the extent to which the organizations rely on digital capabilities.
The best time to start a transformation process comes before a deal is even signed. Starting early can help foster an expanded view of value creation opportunities and possible transformational outcomes and benefits.
While business transformations can take many forms with a variety of outcomes, all derive from the same finite set of levers—foundational processes and structures that are the building blocks of business transformation.
Levers can span every part of the organization within and across functions, business units, geographies, or markets, affecting gross margin down to operating margin. An effective business transformation agenda is a collective set of one or more of these levers, appropriately sequenced, woven, and coordinated within the context of the M&A transaction.
In today’s dynamic economy, converging landscape, and heightened pace of technological evolution, M&A can serve as a catalyst for rethinking strategies and reinventing through business transformation. As organizations pursue deals, it’s worth considering whether the M&A transaction is also a golden opportunity to simultaneously expand value through business transformation.
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Mergers and Acquisitions | Deloitte US
From strategy through integration, Deloitte's M&A services help businesses transform during periods of financial difficulty and navigate complex decisions at every phase of an M&A transaction or divestiture.
