Delivery of deal value and anticipated synergies increase success of deal integration according to Ernst & Young LLP’s Transaction Advisory Services
New York, NY (20 April 2011) — To create maximum benefit from transactions and unlock the most potential from new assets, companies should create a disciplined and repeatable approach to deal planning and integration, according to a new report from Ernst & Young LLP’s Transaction Advisory Services (TAS).
The report, Make it or break it – Driving value through integration, combines insights gained from a series of post-deal transaction reviews for a range of recent deals and the results from an Ernst & Young survey of leading global corporate development officers. It recommends three step-by-step phases that companies should take during the acquisition process to secure maximum value.
“In today’s business environment, there is no such thing as an integration ‘honeymoon,’” says Jeffery Perry, Operational Transaction Services Leader for Ernst & Young LLP Transaction Advisory Services. “Many clients tell us that they feel ill-prepared for Day One operations, do not have the right team in place to achieve planned synergies, or worry that valuable time was lost during integration. Make it or break it – Driving value through integration outlines some practical tactics that companies can use to achieve successful integrations.”
Step One – Pre-Deal Planning
Early planning, a focus on the priority value drivers of the transaction, and communication with key business functions will set the stage for a more streamlined deal process.
- Focus on future values – deal teams should shift their thinking to the future rather than rely solely on an historic view.
- Look closely at synergies—a holistic approach to the deal can unlock hidden advantages, in addition to tax and costs.
- Notice where there aren’t synergies—buyers should also be aware of potential drains on value, such as new products that “cannibalize” existing offerings or tax inefficiencies.
- Develop a detailed plan—well before the close of a deal, a company should document and prioritize how it will achieve synergies and the transaction’s value proposition.
- Assign resources and accountability—success of the deal depends on involving the right people at the right time and companies being honest about the capacity and capabilities of their people.
Step Two—Day One Readiness
“Businesses need to be ready on Day One to deliver products and services to customers. Those that are not prepared risk destroying deal value, customer relationships, and cash flows,” says Perry. “Our analysis of recent deals shows that Day One readiness means that the strategic intent of the deal has been effectively communicated within the organizations and to customers, and that the companies have focused on the details necessary to bring business functions and processes into alignment during integration.”
Perry adds that deal success at this stage depends on three very important variables: the quality of the integration plan, the people assigned to its execution, and whether accountability and timelines have been set.
Step Three—Value-Based Execution
The ultimate success or failure of a fully-integrated deal can be determined with feedback loops and an assessment of deal performance. When companies combine this with the ability to make mid-course corrections, they report that they find substantial value not only from the instant deal, but also from future transactions.
“While preparation is an important aspect to any deal, there are additional steps that a company can take for successful long-term deal execution and benefit,” says Perry. “Ernst & Young report provides relevant guidance that is relevant across industry sectors, size or the deal’s value proposition.”
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About Transaction Advisory Services (TAS)
How organizations manage their capital agenda today will define their competitive position tomorrow. We work with our clients to help them make better and more informed decisions about how they strategically manage capital and transactions in a changing world. Whether you're preserving, optimizing, raising or investing capital, Ernst & Young's Transaction Advisory Services bring together a unique combination of skills, insight and experience to deliver tailored advice attuned to your needs – helping you drive competitive advantage and increased shareholder returns through improved decision making across all aspects of your capital agenda.
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