The evidence is pouring in. M&A activity is bouncing along again. Just in the last three days I read these stories in the WSJ and Boston Globe.
Health-care companies undertook $321 billion of acquisitions last year, more than double the $115 billion in 2013 (WSJ/Dealogic). The majority of health-care and life-science companies that floated last year chose outside CFOs. And the reason according to Korn Ferry – M&A experience especially with the subsequent integration.
Houghton Mifflin Harcourt recently announced the $575m acquisition of Scholastic’s Educational Technology business and spelled out the key post-acquisition integration issues:
- The acquisition gives HMH a leading position in intervention curriculum and services and extend its product offerings in educational technology, early learning, and education services, creating a more comprehensive offering for students, teachers and schools.
- The transaction is expected to yield synergies in 2016 and beyond with annual cost savings of $10 to $20 million.
Akorn, a pharmaceutical acquirer plans to restate earnings from the final three quarters of 2014. Akorn blamed recent acquisitions, of Hi-Tech Pharmacal and VersaPharm for most of its woes!
Almost amusing was the post-acquisition strategy of Citizens Bank in relation to the $10.5 billion acquisition of Charter One Financial Inc. of Ohio. The signage on 200 Charter One branches is being changed. Good to know this is a high priority. The deal completed 10 years ago!
The research done over the years is compelling. The success of a deal rarely rests on price, or deal structure, or market timing or geography. No it rests on post-acquisition integration. Now, integration strategies can be impacted by all these issues: price, structure, market timing or geography. But it’s all to do with how you will run the target. It’s all about factoring into the post-acquisition strategy the facts of that specific deal. It’s the same when pricing deals. The perception of value that a buyer has for a target is unique, so is integration. IBM will integrate a target differently from the way Oracle would integrate the same target. It’s personal.
That’s why acquisitions are a test of how well you can run businesses. You have to be fit to do acquisitions. If there is any doubt you have mastered the art of managing your own business – you have no right managing someone else’s business!
And the dirty little secret about successful integration strategies? Five essential tips from my forthcoming book, The Acquirer’s Playbook:
5 Essential Tips
- Prepare the initial post-acquisition integration plan (PIP) prior to meeting the target.
- Validate your PIP prior to final pricing and deal structure.
- Focus due diligence, commercial, financial and legal on validating your PIP assumptions.
- Appoint one person to be accountable for the success of the deal.
- After completion, implement the PIP with urgency, confidence and accountability.
The Portfolio Partnership offers Acquisition Support Services including integration assistance.