For market observers, the current M&A boom looks disconcertingly like the heady days of 2007 and 2008 in terms of volume and market optimism. The papers and the analysts are full of hope and aspiration as the pharmaceutical, technology and telco sectors indulge in increasingly extravagant claims about cost savings, market consolidation and innovation pipelines….much as they did then when the market knew only one direction of travel.
There is, however, one big difference; the comparative absence of Private Equity. These days, it’s the corporates who are taking up the role of the great consolidator. Over the past five years, if you’d gone to your shareholders in the hope of raising capital for an acquisition, the likelihood of success would have been comparatively slim. These days however, with cheap capital in the system and investors desperate for some kind of yield, the rationale behind a deal seems to be a minor detail in the decision making process. And so asset prices go up, shares of acquirers rise on announcement and the claims of potential benefits from acquisition become increasingly outlandish.
Now, as per my previous piece on public perception, I’m not in the camp of naysaying…there seems little point and the triumphalist call of ‘I told you so’ has never really held much attraction for me. Where I am interested in however, is understanding how corporates that are successful in one particular activity (that of producing products and services) can without much preparation or re-organisation, turn their hand to a whole new set of activities and processes…those of the most of complex of all projects, post acquisition integration.
What’s more, in some cases, we’re are talking about multiple acquisitions, increasing complexity and risk exponentially. The potential for ‘transformation constipation’ is huge…where decision making and corporate governance in general, project management and implementation, communication, new product innovation and customer relationship management all grind to a snail’s pace as the scope of work becomes increasingly complex and difficult to manage. The size of deal is irrelevant (the myth of integration) by the way….it’s the sheer volume which will create the issue.
Many consumer led companies talk and strategize about the ‘last mile…that moment in the provision of a service which actually touches the customer on which they base the quality of their experience. In M&A, the perception is that integration represents this last mile, whereas the reality is a bit different. In the words in Winston Churchill, completing the transaction is not “the beginning of the end” but rather “the end of the beginning”.
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Categories: C suite leadership, Complex transformation, Mergers & acquisitions, post acquisition integration
Tags: Business models and digital transformation, Complexity, cost of capital, distraction from business as usual, market consolidation, Merger integration, Mergers and acquisitions, private equity, winston churchill
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Inarticulate ramblings of a management consultant 
Another interesting blog Ben. I was chatting with an organisation just recently that is acquiring organisations one after another at a fast rate of knots. They understand the need to establish the disciplines, governance and skills to do it properly. Hence the reason for my chat with them.
One of the points you make is that organisations do not always appreciate the downstream burden they create themselves when serially acquiring businesses. The other of course is that post-deal M&A requires a good deal of experience and skills if it is to be done well. Organisations do take a stab at it; often finding themselves making nasty, commonly repeated mistakes on the way.History has a way of repeating itself.
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Interesting…just had the very same conversation with a client where the confusion between project management and integration has become apparent. These are not the same things!
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