A tailored approach for each deal that aligns a deal’s strategic rationale and execution or post-deal integration can maximize value for the acquirer
Recent M&A trends show that growth deals (deals intended to drive revenues through acquisition of new capabilities) are outpacing consolidation deals (deals intended to strengthen market share and achieve cost synergies), suggesting more executives believe that acquiring technologies is significantly faster and less risky than in-house development, and in many instances is the only viable option in the dynamic technology sector.
The latest edition of the CCB highlights diverse reasons for pursuing M&A, e.g., acquisition of technology, capabilities, talent, sector convergence, entering new markets, expansion into adjacent space and dealing with trade and tariff uncertainties. CCB also highlights diverse preferences for doing bolt-on acquisitions, acquisition of transitional capabilities or transformative deals.
In light of various strategic drivers for pursuing M&A and preferences for the deal types, it’s imperative that acquirers take a nuanced approach for each deal that aligns the deal’s strategic rationale to the deal’s execution and post-deal integration to derive maximum value from their deals. This is critical in an environment where the competition for assets is expected to go up, and acquirers may end up paying more for quality assets.
- For example, buyers hunting for transformational deals need to understand that short-term cost synergies may be more challenging to realize when compared with a consolidation play or tuck-in acquisition. Instead, transformational deals require more attention and focus on validating long-term top-line synergy estimates (e.g., cross-selling existing products, new customer relationships, new products).
- As another example, dealmakers pursuing M&A to acquire talent or an innovative startup should have a clear plan for maintaining the innovative culture and retaining talent.
Irrespective of the deal type, it’s vital for buyers to have a mechanism in place before the transaction close to track post-close progress on various strategic parameters and make certain that the deal objectives are met. A detailed commercial diligence pre-sign can validate the market attractiveness and inform appropriate strategies.