Does your integration playbook tackle tomorrow’s M&A challenges?

By Brian Salsberg

EY Global Buy and Integrate Leader

Passionate acquisition and merger integration leader and aficionado of all things deal-related. Global citizen. World traveler. Husband. Father of two.

20 minute read 6 Sep. 2018
Related topics Strategy and Transactions

Show resources

  • Consumer products and retail mergers and acquisitions integration report (pdf)

  • Health care integration report (pdf)

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  • Life sciences integration report (pdf)

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  • Manufacturing integration report (pdf)

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  • Tech, media and entertainment and telecom integration report (pdf)

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The fast pace of change in most sectors requires change in M&A integration strategies and how acquirers think about capturing synergies.

In the past 18 months, we’ve seen some of the most significant deals announced and/or closed in a decade: AT&T–Time Warner, Dow–DuPont, Bayer–Monsanto, Amazon–Whole Foods, United Technologies–Rockwell Collins, T-Mobile–Sprint, Disney–Fox, CVS–Aetna, Cigna–Express Scripts, just to name a few. Deals in 2017 totaled US$3.1 trillion, the eighth-largest figure on record, according to Dealogic, and the value of deals in the first half of 2018 was US$2.3t, just shy of the high set in 2007.

A decade of abundant, flexible and cheap capital is powering strong deal activity, competition and is driving takeout premiums ever higher. On top of this, corporate development executives are increasingly looking outside their sector to acquire new technologies, new customers and new talent. But they are doing so at a relatively high cost and fast pace, creating risks to day-to-day operations as well as to successful integration of the target.

Our new series of reports paints a clear picture: Chief Financial Officers, Corporate Development Officers and transaction leaders in all sectors need to determine whether their M&A playbook is still fit for purpose.

Can you cope with convergence?

As our health care report references, businesses like Aetna and Cigna are using M&A to try to bolster their positions against potential newcomers to the industry, such as Walmart and the proposed health care consortium announced by Warren Buffet, Jamie Dimon and Jeff Bezos. Our manufacturing sector report shows companies such as Rockwell Automation using M&A to fill the gaps in increasingly service-led, tech-driven solutions rather than just products. Meanwhile, consolidation of industries and sectors are increasingly being led by global investment firms. For instance, JAB Holdings and 3G Capital are leading the way with recent deals in the consumer packaged goods space. Elsewhere in the same sub-industry, active deals by Nestlé, Conagra and other traditional industry players are keeping many companies on their toes.

These legacy companies need to rethink who their target market and competition are. While it would have been almost impossible to predict that an app like Uber, as opposed to a company like Tesla, would have been the largest threat to companies like Ford and GM, we are seeing companies being a lot more strategic and forward-looking in their approach to acquisitions.

Are revenue synergies a must-have or nice to have?

Traditional deals tend to focus on cost savings, but revenue synergies typically drive the real value, as cost savings generally allow the acquirer to cover the deal premium and tend to be one-time albeit recurring, whereas revenue synergies can continue to grow. For example, Microsoft’s investor presentation describing the benefits of the LinkedIn acquisition were almost entirely focused on revenue synergies.

Do you have the talent and tools to integrate with maximum speed and minimal error?

Long-term growth depends on successful integration that drives revenue growth. The days where the overall integration could take three to four years are gone — in part because the pace of M&A and the pace of change can increase. The timelines today tend to be 18–24 months or shorter, along with an expectation that 60%–70% of cost synergies will be captured in the first 12 months post-close. Transaction leaders need to start work on integration earlier, diligence needs to go deeper and buyers need clearly defined growth strategies.

How can you avoid a culture clash during a deal?

Failing to understand and consider a target’s culture, such as organizational values, management style, communication style, approach to innovation, and tolerance for risk taking, can lead to disruptive culture clashes during integration. CEOs must proactively take steps to address differences in culture, align messages to critical themes identified for each stakeholder group, strive to retain the best people, and put the right shared vision and incentives in place to ensure that all members of the new organization are excited to achieve success together.

Ahead of the pack or playing catch-up
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Chapter 1

Advanced manufacturing

Ahead of the pack or playing catch-up?

Manufacturing companies’ shift to a services-led business model requires a new M&A playbook to capture growth along with cost savings.

M&A activity among manufacturing companies remains strong, with almost 9 in 10 businesses reporting growing confidence in the M&A market in EY’s April 2018 Global Capital Confidence Barometer for the sector. But the sector is changing fast, heading toward a services-led business model, and M&A is a key component of their transformational growth strategy. Acquisition synergies vary widely by subsector. According to an EY analysis of deals from 2010-2017, deals in the traditional manufacturing arena produced an average realized cost synergy of 6% of target revenue, while that figure was 4% in aerospace and defense and 7% in chemicals. The changing manufacturing business model brings an opportunity to look for new ways to integrate acquisitions to maximize value.

  • Prepare for a service-based future

    As deal valuations rise and companies are bringing in new capabilities, such as data analytics and geospatial mapping to offer customers a full range of services, planning for integration at the same time as front-end due diligence is more necessary than ever. Too many manufacturing businesses only give integration serious consideration when a deal is done.

    • Identify, quantify and execute revenue synergies. Asset-intensive manufacturing businesses tend to focus on cost synergies in potential deals, but the sector needs to shift its mindset to focus on substantial revenue synergies, too, if deals are to create value. Expanding the product portfolio or capturing more of the value chain (such as the after-market business) are two examples.
    • Find “reverse integration” opportunities. What is the target doing that should be adopted to create an operating model fit for the future?
  • Prioritize people as much as processes and products

    • Embrace new skills or risk hemorrhaging value. In acquisitions predicated on new capabilities, businesses need to connect with key talent to avoid losing their skills and knowledge. For manufacturers acquiring a tech company, are the coders the key? Do the salespeople have important relationships? Are the founders the key, and do you need to structure the deal to keep them engaged?
    • Concentrate on cultural fit in cross-sector deals. Strategies that we have seen implemented include deploying a formal culture and change management road map, utilizing culture survey tools for employees, and a change action plan and regular monitoring of the culture change.
    • If a company is buying a business to build a solution in which its products are just one part, it needs to consider how its own sales teams will need to be trained and whether sales incentives need to be adjusted.


The shift to a solutions-led business is leading industrial companies, especially in manufacturing, to make acquisitions outside of their normal skill sets. The focus needs to shift from cost-cutting to using these new offerings to grow revenue. 

Here’s our full advanced manufacturing report. If you have any questions or would like to discuss your M&A and integration strategy, use the "Contact us" form below to contact David Gale or Neil Desai.

Different playbooks for different goals
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Chapter 2

Consumer products and retail

Different playbooks for different goals

Transformative consumer products and retail deals focused on allowing a smaller asset to grow require different integration plans.

The appetite for M&A deals in the consumer products and retail (CPR) sector is growing as firms race to counter cross-sector threats and revitalize tired portfolios with fast-growing niche brands. But rapid shifts in everything from technology to talent and consumer taste mean the old consumer packaged goods model is no longer fit for serving the future consumer. Companies need to develop different integration strategies, depending on whether the deal is predicated on growing the acquired brand or reaping cost synergies by putting a sizeable business into their organization.

  • Integration plans for different operating models

    Large acquisitions tend to generate cost synergies because they can get pulled into the buyer’s operating model quickly and in a manner that eliminates significant duplication. Smaller acquisitions of growing brands can happen for reasons that don’t necessarily focus on cost synergies. Two deals involving the same large consumer goods company can illustrate the point:

    • In an acquisition of a majority stake in a startup with a peer-to-peer social media model, the acquirer let the founders keep a minority stake and kept them in place to run the company. At the same time, the buyer said it planned to employ its R&D facilities and its supply chain capabilities to help grow the business.
    • In a more transformative deal, the company merged its business with a large portfolio of brands. The synergies there were more focused on costs, cutting overlap, distribution rationalization and margin improvement.


  • Appropriate communications plans for talent retention and business continuity

    Understand how the deal effects employees at both companies, then choose a communication strategy that fits the deal:

    • Larger deals can cause uncertainty for employees of both companies — they can be worried about how the deal will affect them and whether they will continue to be part of the larger company. Communicating the integration plan to all employees and then executing quickly can help make things clearer.
    • When a smaller company is purchased, the uncertainty falls almost completely on the employees of the target company. The buyer needs to be clear that the acquired asset will stand alone (if it will) and that sales incentives and performance metrics will remain the same to help alleviate those concerns and retain talent.
  • Revenue synergies, cost synergies or both?

    Cost synergies achieved through the reduction or elimination of duplicated costs vary across CPR subsectors. Recent EY analysis of precedent transactions shows that the median cost synergy as a percentage of target revenue in the consumer subsector is 5%-6%. The apparel subsector generates median synergy benefits of 4% while retail produces median benefits of 3%.

    Revenue synergies instead could be the deal driver:

    • When integrating a larger deal built on cost synergies, arduously tracking synergies against a well-defined road map and issuing weekly updates to make sure the integration remains on pace to deliver the promised value is essential.
    • That same rigorous measurement and communication could crush a smaller acquisition. Find relevant drivers, such as revenue growth or new customers, to provide some measurement and accountability, but do so with sensitivity to the target’s culture.
    • Revenue synergies could be the deal driver, even in larger deals. CPR companies have driven out costs for years, but many struggle for growth. Look to the top-line as the key synergy. Can you expand distribution without harming the acquired business? Can you bring the product to new geographies? Cross-selling new products to new customers and pricing power are two examples of revenue synergies. 

As consumer products and retail companies try to bring in fast-growing, often smaller, companies, they need to become more nimble in how they approach integration. In order to get the most growth, they need to have different integration playbooks, based on different acquisition goals.

Read our full consumer products and retail report. Use the "Contact us" form below to contact Amiya Setu and Jeff Wray to discuss your M&A and integration plans.

Delivering growth with end-to-end patient care
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Chapter 3

Health care

Delivering growth with end-to-end patient care

The race to create a new, integrated health care model requires a new strategy for creating value when bringing the parts together.

Health care payors and providers are racing to create an integrated care model that seamlessly delivers end-to-end patient care from outpatient clinics and urgent-care centers, hospitals, rehabilitation facilities, home health care and hospice services — all increasingly linked more closely with payors and retail (e.g., pharmacies). But, even as hospital networks, payors and other health care providers battle to expand, most haven’t yet figured out the best version of this integrated care delivery model.

  • Focus on end-to-end patient case delivery

    The goal is to provide continuity of care across a range of services within the same network, combining different medical needs and value-based models of care, based on a more dynamic relationship between patients, providers and payors:

    • Pursue authentic integration, not just asset acquisition. This means buying and integrating home care, post-acute facilities, skilled nursing and rehab facilities, as well as primary care acquisitions for patients who don’t require the intense resources of a hospital. The benefit is to offer care in an appropriate setting, which in many cases can be in a less cost-intensive setting, such as a patient’s home or an urgent-care facility, rather than a hospital emergency room.
    • The industry is creating various ideas for new, integrated care delivery models. The time is ripe for experimentation with new combinations: bring the primary care office and the hospital together for a care coordination discussion; compile data on complex patients in the hospital, including how long they have been resident; and benchmark your findings against diagnosis-related grouping expectations.


  • Maximize the value of data

    The real value in coordinated care delivery stems from data combined with a different relationship between provider and patient:

    • Build a cohesive system of care that includes both lower-cost, targeted care sites throughout the community for lower acuity care and regionalized, consolidated centers of excellence for those who need higher levels of care.
    • Update your data gathering and analytics capabilities. Health plans offer the broadest picture of a patient’s needs and care consumption. Health plan patient data compiled through convergence deals will provide an even wider picture.


  • Don't dismiss cost synergies

    Cost synergies can be a nearly taboo subject when M&A is considered, as providers want the focus to be on patient care. The regulatory framework also can work against cost cutting, especially in certain locations. But M&A can present an opportunity to make choices:

    • Look at IT systems improvements. Even as you align and harmonize an integration, use the M&A event as a chance to do the hard work of combining and updating IT systems. It may mean a near-term financial hit, but can lead to improved efficiencies and cost savings in the future.
    • Share services. If part of the acquisition rationale is to achieve greater scale, then the efficiencies of scale can be achieved by combining non-patient-facing functions, such as finance, into shared services centers.
    • Negotiate as a combined entity. Use the scale to have more power in negotiating with vendors and try to get the best terms in payor contracts.


The drive to develop end-to-end patient care delivery means health care companies are acquiring assets outside of their comfort zones. Understanding those assets and leveraging the data that they bring are key to getting the most value out of a deal.

Get our full health care report and use the "Contact us" form below to contact Mallory Caldwell or Adam Sorenson for questions or to learn more about health care M&A and integration strategy.

Finding synergies in new treatments
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Chapter 4

Life sciences

Finding synergies in new treatments

Regulatory concerns and cultural compatibility can complicate integration in life sciences industry M&A.

Life sciences is a high-risk, high-reward industry where innovation is key to growth. New medical technologies take years to develop and are required to be validated through long and expensive clinical trials in which they have to be compared to the standard of care. After demonstrating clinical acceptance and being proven pharmaco-economically worthy in the eyes of payors to achieve certain scale, larger players often acquire these assets at high EBITDA multiples.

Larger companies are looking hard for these growth assets, as they have been challenged by the lack of home-grown new blockbuster treatments, pricing pressures and medications becoming available as generics. Competition for assets is tough and driving valuation multiples higher. We have seen deals where the bidders have increased the offering price by 10% to 20% at a time, rather than the typical 2% to 5% increments.

Meanwhile, cost synergies, which can help mitigate those higher multiples, vary by subsector within the life sciences industry. An EY analysis of deals from 2010 to 2017 showed that pharma deals generated an average cost synergy of 24% of target revenue, one of the highest levels of all sectors examined, while the similar number for medtech deals was 8%. This variance is likely due to pharmacos having a larger geographic footprint and have more direct duplication in the commercial, supply chain and operational infrastructure that can be eliminated.

Below are several suggestions to maximize synergies and accelerate revenue growth in big deals where integration can take a long time.

  • Define the strategic intent of the acquisition internally

    Being clear about deal rationale internally can help companies adopt an appropriate level of integration:

    • Incubating a smaller brand, such as a large pharma company buying a smaller, natural, over-the-counter treatment: Focus on growing the business with new sales channels, rather than burdening it with multiple layers of non-value-adding administrative work streams.
    • Adding adjacent categories or expand into other geographies to build additional scale: Consider more aggressive integration into the sales system in order to expand further.
    • Accumulating larger businesses to add directly into their existing platform of care: Execute more thorough integration, encompassing the rationalization of the back office, R&D, salesforces, etc. When a company spends tens of billions of dollars to acquire another business, it will likely look for billions of dollars of cost synergies that can be made as quickly as possible to appeal to investor community expectations.


  • Understand cultural differences to keep key talent

    Depending on the asset, the culture of the acquirer and the target can be quite different. A big pharma company is likely to be more risk averse, given the regulated nature of the industry. The dress code, incentives for salesforce, tolerance for bureaucracy and a host of other cultural variables may be different than at a smaller biotech company that is being acquired. When does culture matter?

    • If the goal is buying an existing pharmaceutical asset or technology, the cultural issues may not matter. It may be more important to get the drug into the acquirer’s commercial machine as quickly as possible or to use the acquirer’s network to enroll patients in clinical trials more quickly. Making it clear that the target will need to adapt to the buyer’s culture can be the right message and could even help speed up necessary headcount reduction as some employees of the target seek other opportunities.
    • Conversely, if the target is, say, a pure oncology company, every scientist is an asset that the company may want to retain. In that case, it behooves the buyer to look for the incentives those employees value most. Knowing the acquisition rationale lets employees understand where they will fit in the new organization. For example: emphasizing the R&D capabilities that can help scientists at the target develop new treatments; showing the target’s employees the opportunities in a larger business; or letting them know that they will be able to operate as independently as possible.



  • Anticipate potential issues and react quickly to unexpected ones

    The integration plan can be working, and then something unexpected happens. Anticipate potential regulatory affairs issues that could come up during integration, be ready to act if something changes and be realistic about what products should or should not progress:

    • Be aware of how your supply chain could be affected during integration and plan in advance. One large pharma company wanted to immediately rebrand the seller’s product in the market, which involved 4,000 registrations for Class I–III products in more than 60 countries. But doing so could cause distribution problems if not done properly, as local regulators needed to accept the new product registration. The company needed to make sure its customers had enough product on hand to cover the reregistration period, lest it be out of the market for a time and risk upsetting regular customers.
    • Base product development decisions on science. The incentives for whether a product moves to the next phase of clinical trials can change, with there being financial incentives for moving to the next trial stage. A typical step in the industry is having a third-party consultancy group create a scientific advisory board conduct external due diligence, validating assumptions around place in the care paradigm, pricing and size of the population that could use it.


  • Assign long-term deal responsibility

    Many of the transformative acquisitions in big pharma can take several years to integrate in order to realize all the synergies. But in that time, the CFO and people in the integration management office may have moved on to new positions and responsibilities, and the initial cost reductions and revenue growth that were accomplished in the first two years become the de facto baseline. In order to maximize synergies:

    • Make sure the integration plan clearly lays out synergy benchmarks that go beyond the first two years. In one case we worked with, the CFO actually laminated the synergy plan and made sure to pull them out and review them regularly.
    • Make sure that somebody in the organization who can stick with the deal long term is responsible for continuing the integration. In at least one integration in which we have been involved, a senior person who was nearing retirement was given this responsibility and continued on to make sure the company continued to maximize synergies for several years. 


Maximizing synergies in a life sciences acquisition brings specific challenges, due to the highly regulated nature of the business, the valuations where deals are being made, dependence on R&D, quality concerns and specific skill sets — developed over many years — of the key talent at the companies.

Get the full life sciences report. If you have any questions, use the "Contact us" form below to contact Ambar Boodhoo or Arda Ural to learn more about life sciences M&A and integration strategy.

Soaring valuations mean less room for error
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Chapter 5

Tech, media-entertainment & telecom

Soaring valuations mean less room for error

Retaining creative talent and the innovation engine are key for TMT companies as M&A deal valuations rise.

Deal values are rising in the technology, media & entertainment and telecommunications (TMT) sector, with 2018 on pace to meet or surpass the record levels seen in 2015–16, as cash-rich corporates and hyperactive financial buyers are competing for targets.

Sky-high valuations underscore the need for TMT companies to find a reliable path to capture synergies, moving away from legacy playbooks toward a nimble, value-focused integration strategy based on the goals of each individual deal. Integration should fuel innovation, inspire talent and catalyze the transformation needed to win as the next generation of technologies matures.

  • Don't destroy your innovation engine

    • When large, mature companies buy more agile companies, they often stifle the target’s culture and innovative spirit through burdensome processes and unnecessary integration. A purposeful, deal-specific integration strategy sets the framework for what needs to be integrated now, what can be delayed and what should remain separate for the foreseeable future.
    • Develop integration priorities based on the rationale for the acquisition. Do you want to align product road maps immediately? Should back-office integration be accelerated to enable cost synergies? Should certain assets be kept separate for potential future divestment?
    • Know why you’re integrating the functions and activities that are slated for integration. What business purpose does each serve? Don’t integrate for the sake of integration.



  • Retain and motivate innovative talent

    • Keep a close eye on the talent that can make up a significant portion of the value from a TMT acquisition: engineering and creatives. Alienating these employees is a sure and fast way to destroy value.
    • Perform robust human capital diligence before inking the deal to understand what motivates them — and develop thoughtful and creative programs to both retain and inspire them.
    • Define what behaviors need — and need not — be changed to let creative mindsets thrive while reaping the benefits of scale and corporate control where merited.




  • Catalyze business transformation

    • Consider how the merger integration process can become an agent for more comprehensive transformation of key operating elements at both the acquirer and target.
    • Ask which technological advances, such as automation and robotics, machine learning and data analytics, can advance the combined company’s competitiveness during the integration, rather than trying to retrofit those later.



  • Be realistic - and stay focused

    • Don’t assume significant cost synergies exist until you understand the target’s business. Unlike in horizontal mergers, buyers in vertical deals lack operational experience in the markets they are entering and are likely to find fewer back-office redundancies than they expect once they dig into the target’s operations.
    • Maintain focus on the deal rationale by setting KPIs aligned to the deal and monitor them at least two years post-close. Metrics should be diverse (technical, customer-oriented, financial, employee-related) and be both historical and predictive.
    • Top executives should engage with and be accountable to the integration as long as it takes to secure the deal’s synergies.



In this era of sky-high valuations, TMT dealmakers have even more to lose from shallow integration and synergy realization planning. They must develop fit-for-purpose, tailored integration strategies with laser focus on capturing deal value.

Read our full technology, media, and telecommunications report. For questions or to learn more, use the "Contact us" form below to contact Ken Welter or David S. Kim.


Post-merger integrations are exciting and dynamic, and can create significant positive change. Merging is just the first technical step towards creating a 1+1>2 equation. But it’s time to throw out the old integration playbook. Changing business models, new and more nimble competition and emerging technologies such as AI and robotics present threats and opportunities. 

About this article

By Brian Salsberg

EY Global Buy and Integrate Leader

Passionate acquisition and merger integration leader and aficionado of all things deal-related. Global citizen. World traveler. Husband. Father of two.

Related topics Strategy and Transactions