After closing time: Shutting the door on high-risk M&A

Post-acquisition integration (PAI) is undervalued. Despite being one of the most critical stages in any M&A deal, integration is arguably still not viewed as an industry, profession or capability the same way that M&A is overall.

“It's that latter part [of the M&A lifecycle] that is significantly underserved by the market,” says Henry McNeill, Integration Consultant with more than 35 years years’ experience in post-acquisition and merger integration. “I would probably go as far to say that PAI is not an industry.”

PAI can be defined as the project driving synergies, efficiencies and benefits to make the acquisition worthwhile. Yet, huge numbers of them fail to deliver on these initial promises.

The rate of M&A integration failure is estimated to be anywhere between 50 and 90 percent. McNeill says that half of all companies still haven’t been integrated a year after their M&A deal.

“Many companies remain unintegrated well after their acquisition date," says McNeill. "It is very easy for a company to get distracted from the more difficult delivery of synergies and solve more urgent operational problems."

With such high numbers of M&A opportunities opening up this year post-Covid-19, it’s essential that integration becomes a priority for dealmakers. After all, it’s the only means of realizing the valuable synergies and benefits laid out in the deal. But a shift is on the horizon.

‘Successfully closed’ but still a failure

Failure can mean that value has not been created out of the M&A deal, key talent has been lost, or synergy targets have not been hit. For M&A to be a worthwhile venture, integration efforts need to drive the synergies, efficiencies and benefits identified prior to the deal going ahead.

A failed integration can result from cultural challenges, embedded working practices, communication breakdowns, and a lack of visibility across due diligence information. Frequently, it comes down to insufficient forward planning and a lack of purpose-built technology, which could help address such issues.

While this is an exercise in management, it is different in the respect that companies are comparing similar processes, applications, architectures and organisations and deciding which one to use – either the buyer, seller or a new solution. Until now, there hasn't been a platform that allows you to record all aspects of PAI activities.

PAI no longer an afterthought

The new Ansarada Deals™ technology encompasses the full deal lifecycle, from the earliest strategic work all the way through to PAI. With Deal Workflow™, digitized checklists and project management tools allow buyers to prepare earlier for the integration aspect of M&A, linking up due diligence information with the integration team, which according to McNeill, has traditionally been less than transparent.

“The typical status quo is whenever a company acquires its first company, they'll start from scratch,” says McNeill. “And seeing Ansarada had a vision of going for more than just the sales process, wanting to cover all aspects of the mergers and acquisitions lifecycle, I saw the opportunity there of developing a pathway for PAI, which I hadn't seen in any other virtual data room.”

Having this framework laid out in a centralised deals space gives teams the confidence their required outcome will be achieved with fewer delays, decreased risks and more coherent communication and execution. Customizable integration topics can go as in-depth as the acquirer wants or needs to, but even addressing them at a high level will get the acquirer thinking through all of the potential scenarios.

“Bringing structure to all PAI activities - including collecting information, setting clear accountability and ownership, and tracking workflow and progress in one place - is how buyers are able to establish a clear path from opportunity to outcome from the board down, and manage it with high efficiency,” said Ansarada chief executive.