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How to Avoid the Three Main Derailers of Merger and Acquisitions' Success
How to avoid the three main derailers of Merger and Acquisitions’ success
by George Bradt, senior contributor for FORBES. Sep 20, 2022
Some hear merger and acquisition. Some hear Scylla and Charybdis. In either case, most get lured to their death or destruction. While the lure of Sirens was a myth, we do know that 83% of mergers and acquisitions fail to increase value. And we know why. They fail because of poor strategic focus, poor cultural integration and/or poor delivery of synergies. Unfortunately, avoiding these Sirens requires more than just putting wax in your ears. It requires deliberate and detailed effort.
Strategic Focus
How many times have you heard someone say one of their strategies for growth is mergers and acquisitions? But mergers and acquisitions are not strategies. They’re an enabler of another strategy.
Strategy is about the about the creation and allocation of resources to the right place, in the right way, at the right time, over time to overcome barriers and deliver what matters. That means there’s a wrong place, wrong time and wrong way. Thus, strategies are about fundamental choices about where to play and how to win. And the heart of how to win is an organization’s core focus.
Michael Porter suggests that almost any value chain includes design/invention, production, delivery, and customer service/experience in addition to marketing and selling. Your single overarching strategy should identify the right way to build and leverage differentially valuable advantages versus competitors at one of the first four while also marketing and selling – which every organization must do one way or another.
That core strategic focus flows into strategic priorities supported by enablers and capabilities. For example:
- Apple wins with predominant design and technologic innovation. Its stores are a marketing vehicle.
- Coke wins with a predominant production system, based on its physical assets, partnered with its bottlers’ predominant distribution system.
- Walmart wins with a predominant product-supply/delivery infrastructure.
- Ritz-Carleton wins with predominant people-based service/guest experience.
The 17% of mergers and acquisitions that do create value generally enable an already existing strategy. Apple should do mergers and acquisitions that further enable design. Coke should focus on production. Walmart should focus on product-supply or delivery. The Ritz-Carleton should focus on guest experience. And you should focus on mergers and acquisitions that enable your core focus.
Cultural Integration
How many times have heard someone say they’re going to acquire another organization and keep it running as a separate entity to preserve the strengths they bought? Too many times. Almost by definition, you can’t reap the synergistic benefits of a merger or acquisition if you keep it separate. It can’t enable your core focus separately. You have to merge them in and integrate them.
You’ve got three choices. 1) Assimilate their people into your culture. 2) Assimilate your people into their culture. 3) Combine the two into a brand-new culture. The first two choices are painful for the people giving up their heritage. Many of them won’t make the transition and will leave one way or another. The last is the most complicated. In any case, the culture must align with the core focus:
Deliver Synergies
Too many times, “synergy” is a euphemism for “cost-saving.” To be fair, cost-saving is an important way to free up funds for other investments. But, the most important synergies combine complementary strengths to enable strategic priorities.
Witness Disney’s acquisition of Pixar. They didn’t care about the cost-savings. They bought Pixar a) to leverage its technology across all its animation and b) to acquire new leadership for Disney Animation. Then they bolted others on to the new strengthened platform to get access to other characters and distribution channels with their acquisitions of Marvel and then Lucas Films/Star Wars and then Fox.
The Right M&A Mindset
None of these are easy. The thinking is complex. The implementation and change management required is complex. As you look at future M&A, think through:
- The strategic focus. Be sure you’re clear on what your core focus is and how the merger or acquisition target will enable your strategic priorities.
- The cultural integration. Yes Virginia, you do have to integrate your acquisitions. Have a bias to choose one or the other cultures and assimilate all into that.
- Delivering synergies. Yes. Cost-savings matter. And look for the complementary synergies in line with your strategic focus and new, combined culture. Yes. All three of these ideas are integrated – as should be your mergers and acquisitions.
At SCD Advisory, we offer a range of services from deal preparation to transaction execution. Contact us at info@scdadvisory.com to find out more.
Written by: Pierre Briand, Founder & Managing Partner
Pierre brings 25 years of expertise in advising entrepreneurs, with a deep background in management and financial advisory across corporate finance, private banking, and wealth management. His extensive experience includes numerous sell-side and buy-side deals, IPOs, mergers, integrations, and consulting projects for both small businesses and large global corporations. As an established and highly regarded advisor, Pierre is known for his savvy, trusted guidance.
Pierre’s career began in Australia before he moved to France, where he worked with prominent business figures like billionaire François Pinault on M&A deals within the Artemis group. He then founded BC&D, an M&A small-cap firm in Paris, where he managed corporate advisory services across Europe, covering both origination and execution. His work extended beyond transactions, advising entrepreneurs on wealth management strategies to optimise the transition from business ownership.
In Paris, he held advisory roles at the Belgium Family Office (DeGroof) and as a senior private banker and head of the HNW segment for France at JP Morgan. Returning to Australia in 2015, Pierre established the ANZ subsidiary of a UK-headquartered M&A firm, executing 9 M&A transactions across Australia. In 2019, he launched SCD Advisory, where he has since completed 35+ transactions, earning multiple global awards in M&A advisory from 2021 to 2024. Notably, he was named ‘Deal Maker of the Year’ by Finance Monthly in 2022 for his sale of Hypothesis to McKinsey & Co.
Pierre graduated from the Business of Troyes in France and has a postgraduate in Corporate Finance from the University of Caen. He is also a certified Financial Analyst and a Graduate of the Australian Institute of Company Directors (GAICD). Pierre further enhanced his credentials by completing the “Leading Professional Services Firms” program at Harvard Business School. His track record and accolades highlight his dedication to excellence and his exceptional skill in delivering successful outcomes for his clients.
Pierre is French, Australian citizen, Overseas Citizen of India. He is married and has two children. He is passionate about international travel, gastronomy, sailing and golf. As an experienced sailor, his motto in business and life in general is: “We cannot direct the wind, but we can trim the sails”
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