Mergers and Acquisitions (background) Prof Scott Moeller

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Mergers and Acquisitions(background)Prof
Scott Moeller
Tailored learningCass Executive Education
bespoke programmes
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MA Volumes go in Waves and we're now on the
downward slope
Source Thomson Financial
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Most acquisitions historically have been
failures

• 1987 McKinsey 116 acquisitions 61 failed
• . Porter 56 of all acquisitions get sold off
  
• 1996 Mercer/ 150 deals 57 failure rate,
• Business Week 30 had 'substantial' losses
• . Economist 150 acquisitions 70 failed to meet
  expectations
• . McKinsey 160 acquisitions Only 12
  accelerated their growth
• 1997 Sirower 168 mergers Only 20 return in 4
  years
• 1998 A. T .Kearney 115 mergers 58 added no
  value
• 1999 McKinsey 77 fail to yield expected
  synergies
• 2001 KPMG 118 acquisitions 70 created no value
  / 31 destroyed value

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Why do MA deals fail?
Blue Non CFO CFO survey
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MA Paradox

• Most mergers fail, but few companies succeed
  without acquiring or merging.
• Can you be a large organisation without having
  made acquisitions?
• Is organic growth sufficient to become a leading
  player?
• Is there a 'best time' to make acquisitions?
• Managements challenge
• 'How can you reconcile the low odds of deal
  success with the need to incorporate mergers
  into the growth strategy.'
• Or today
• 'How to make deals successful NOW when the
  market's going down?'

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The current merger wave is different

• 1987 McKinsey 116 acquisitions 61 failed
• . Porter 56 of all acquisitions get sold off
  
• 1996 Mercer/ 150 deals 57 failure rate,
• Business Week 30 had 'substantial' losses
• . Economist 150 acquisitions 70 failed to meet
  expectations
• . McKinsey 160 acquisitions Only 12
  accelerated their growth
• 1997 Sirower 168 mergers Only 20 return in 4
  years
• 1998 A. T .Kearney 115 mergers 58 added no
  value
• 1999 McKinsey 77 fail to yield expected
  synergies
• 2001 KPMG 118 acquisitions 70 created no value
  / 31 destroyed value

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And 2008 looks to be even better!
Short term Shareholder Return
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What has changed in the past several years?
Most organisations are now far more disciplined
and focused in their transactions than ever
before. In particular, we have noted, and
confirmed by live interviews, the following
recurring themes
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Three essential Components to a Merger Deal
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MA The Seven Deadly Sins
Source financialworld.co.uk, March 2007
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Good and bad reasons for doing deals
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Criteria for Target Assessment
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Alternatives to MA
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Total Deal Cost
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Public Deals 6 Step Process
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Simplified Deal Process
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• Due Diligence

Know thy enemy and know thyself in a hundred
battles you will never be in peril. Sun Tzu
400-320 BC
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Due Diligence Key success factors
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• Post Merger Integration

A wise person once said that a beautiful
marriage is one in which two people become one.
The trouble starts when they try to decide which
one.
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Change or Preserve?
High
Change in Target
Low
High
Change in Acquirer
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Focus of Integrations
Source Mergermarket / CMS Cameron McKenna, Feb
2007
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LEARN CIA principle
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Poor communication (use of "killer"
phrases)highlights poor underlying strategy
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Two related "killer" phrases
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More communication indicators of poor
implementation
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Summary Key Success Factors in Post-Merger
Integration
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Mergers and Acquisitions