How to pull off a successful merger - tips and insights from experts

Research by the M&A Research Centre at Cass Business School advises on how companies can execute successful M&A transactions, ensuring full value and the successful integration of the target.

The announcement of a merger deal is not always greeted warmly by investors. The current prevailing view is that most mergers fail to deliver on their strategic promise and can actually wreck shareholder value. Yet with increasingly globalised markets M&A is still a viable route to growth, providing that it's done right.

Managing a successful merger transaction, paying the right price and ensuring integration of the target company runs smoothly and fulfils the rationale for the deal are all aims any company embarking on M&A should have. The report Successful Dealmaking, produced by the M&A Research Centre (MARC) at Cass Business School provides insights into how these aims can be achieved, and into what distinguishes successful deals.

This report is based on results from two recent studies conducted by MBA students at Cass. The first looked at 70 large acquisitions by UK and US companies between 2007 and 2011, comparing those that created shareholder value with a matched sample of deals that destroyed it. The second study surveyed 31 professionals on their views of the role of HR in M&A transaction success.

The analysis highlighted three main areas for focus during an M&A transaction:

  • Having a clear strategic intent and communicating it openly Successful acquisitions were often made to enhance or add capabilities to existing systems or to increase access to R&D or technology. These represent clear strategic intent. In addition, successful acquirers tended to share detailed information about what their plans would be once the deal had been completed.
  • Employing good diligence and negotiating skills to avoid overpayment The analysis showed that unsuccessful acquisitions usually came at a price premium of 45% on average. Successful acquisitions were on average at a premium of 31%.
  • Understanding the importance of key operational staff retention and involving HR early on in the deal process Retention of key operational staff can be a very important factor in achieving a successful acquisition, whereas senior executive teams are comparatively more disposable.

Indeed, the study demonstrates just how important HR issues are in determining the success or otherwise of the deal. A survey of company executives gave the overwhelming view that a HR component should be involved in a M&A bid as early as the targeting stage. HR teams can help define post-completion reward systems, anticipate and resolve cultural conflicts across geographical or ideological lines, and all the time maintain open communication to the employees affected. These can be crucial to ameliorating staff anxiety, as when people are fully informed of what is happening and how it affects them, they are more willing to accept change.

The full report was recently published by MARC (Cass' M&A Research Centre) and is available for free download here.