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Toward transaction excellence: Formalized deal processes - EY - Global

Toward transaction excellence:

Formalized deal processes

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When executing transactions, how often do you use a formalized process for the following?


When executing transactions, how often do you use a formalized process for the following?

Key questions to ask:

  1. Were pre-deal assumptions validated post-transaction—and if not, what drove any discrepancies or shortfalls?

  2. Was the deal team adequately resourced and focused on the right issues?

  3. How closely were integration tasks and milestones mapped to the achievement of synergies?

  4. How effective were the chosen metrics in terms of achieving desired outcomes? How could they have been improved?

  5. What mechanisms are in place for evaluating deal performance and institutionalizing lessons learned?



At its heart, a formalized deal process is repeatable and continuously improving, which makes this next statistic surprising.

Summary: For those respondents with formalized deal processes, satisfaction is significantly greater, both in terms of the number of deals closed and performance in integration. Formalized processes and deal satisfaction are highly correlated, if not inextricably linked.

Most companies say that they always or often use formalized processes for the majority of standard deal-related tasks. Core examples include due diligence, valuation, board and stakeholder approvals and transaction documentation.

Our study shows that companies expressing the highest levels of deal satisfaction also display higher degrees of formalization in deal processes. For example, those companies with formalized processes to identify operational synergies were twice as likely to express satisfaction with performance in transaction integration as those lacking formal processes.

Those with formalized processes for determining cultural fit with the target expressed significantly higher degrees of satisfaction in terms of both transaction integration and the percentage of deals closed.

But less than half, 48%, say that they always use formalized processes to conduct synergy identification and analysis. Such analysis is not only one of the most critical aspects of valuation, it is also essential to guiding the process of integration.

By the time the study reaches asset portfolio review, only 44% say they always (24%) or often (20%) apply a formalized process. What this means is that a majority of companies are not routinely assessing the whole of the corporate portfolio in terms of its performance and capital allocations.

At its heart, a formalized deal process is repeatable and continuously improving, which makes this next statistic surprising. Only about half of companies, 51%, say they always (23%) or often (28%) conduct a review of deal performance.

When executing transactions, how
often do you use a formalized process
for the following?

When executing transactions, how often do you use a formalized process for the following?

Core transaction processes

Leading CDOs fully understand the importance of developing and documenting formalized processes across the range of transaction tasks. In this way, the steps leading to successful transactions become institutionalized and repeatable.

Some of the processes requiring documentation, formalization and continuous evolution include:

  • Due diligence. Corporate development staff should have a ready-made game plan for due diligence that is formalized and repeatable. The process should be forward-looking, focusing on the key business and valuation drivers behind any transaction, along with associated risks. Due diligence should also provide a final assessment of the thoroughness of pre-close integration planning and the likelihood of success.
  • Synergy identification. The company should have a defined approach for identifying, modeling and evaluating as well as understanding the specific challenges to achieving deal synergies.
  • Deal modeling. Companies should be competent in building business models that can evaluate how a transaction advances and (or) complements core business strategies and other elements of due diligence.
  • Working capital assessment. Deal teams should be armed with a systematic approach to identifying and then realizing working capital opportunities within every transaction.
  • Integration. Deal teams must map the actions and milestones required to achieve specific synergies and other sources of deal value.
  • Accountability. It is not enough to identify necessary actions. A disciplined approach to transactions demands that specific actions be assigned to specific individuals.
  • Metrics. Individuals and teams assigned specific actions must also be held accountable for timing and quality; reward structures should be aligned with the achievement of key drivers of deal value.

It will also be important to recognize that "formalized" does not imply "static." To the contrary, one of the most important elements of a formalized approach to deal processes is that they are continuously reviewed and improved. The benefits of conducting such a review post-close should be evident.

Leading companies, however, often perform such analysis not only when a deal is completed, but also at various stages during a live transaction. By reviewing a deal in progress, companies are able to identify any shortcomings in performance in time to implement course corrections.



Key insights:

  • Formalized and enhanced transaction processes build greater value
  • Due diligence is forward-looking
  • Working capital needs are assessed up front
  • Metrics for deal evaluation, along with accountability, are clearly defined


 Key questions to ask:



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