The Case for Developing Better Divestiture Practices in a Hot M&A Market
PricewaterhouseCoopers (PwC), 2006

To win on the exit and the acquisition, and avoid mistakes that diminish the value of sell side deals, you'll need to become a prepared seller with a more disciplined framework. This is especially true when a sophisticated buyer, such as another private equity firm, hedge fund or industry leader, is sitting on the other side of the negotiating table. This issue of TS Insight discusses the benefits of preplanning and enhancing the divestiture process. [ more ]

Managing your Divestiture Process: The Early Bird Advantage
By Neil Dhar and Mark Ross, PricewaterhouseCoopers (PwC), 2006

How good is your divestiture process? Are you a prepared seller? Remember how unpleasant it was the last you did business with an unprepared seller? The seller's team was long on data, but short on analysis, with a data room organized to appeal more to lawyers than businessmen. To make matters worse, the seller could not keep up with information requests. and access to management was limited, so you couldn't get the answers you needed or cut through the red tape. [ more ]

Habits of the Busiest Acquirers
By Robert N. Palter and Dev Srinivasan, McKinsey, 2006

M&A executives at the most successful US companies understand not only how acquisitions create value but also how to enlist the support of the organization. [ more ]

A User’s Guide to Successful M&As
By Herman Vantrappen and Petter Kilefors, Arthur D. Little, 2005

The global number of mergers and acquisitions has rebounded strongly since 2004. Many top executives are wondering whether it’s worth getting back into M&A as a tool for growth - and if so what best-practice maximises the chances of success. As Vantrappen and Kilefors explore in their article, not all mergers and acquisitions make sense. They provide a summary of what academia has to say, the steps to success and what executives need to do to make the best from the complicated world of M&A. [ more ]

Merger: Can You See the Big Picture?
By Therese Hill, BearingPoint, 2005

Half of all major mergers since 1990 have eroded shareholder value. And 77 percent of acquisitions fail to return more than their cost of capital. What can companies do to increase their chances of completing a successful merger or acquisition? Looking at the complete picture - from minutiae such as signage to larger issues such as employee morale - helps companies avoid losing value and continue making smart, fast decisions. Proper planning and development of a clear, focused vision of integration goals, establishing a realistic timetable, recognizing and understanding differences in the corporate cultures, and managing risk are crucial. [ more ]

Beating the Merger Integration Odds: Why Most Mergers and Acquisitions Fall Short of Expectations
Deloitte, 2005

Companies undertake mergers and acquisitions to increase market share and gain competitive advantage. But most deals fail to deliver the value everyone expects. How can companies entering mergers improve their chances of success? It's not as simple as chanting the usual mantras. Concentrate on synergies. Integrate quickly. Focus on customers and revenue. Communicate. This kind of folk wisdom yields the same results everyone gets: a less than even chance of creating significant value. So, how do you achieve results that truly matter? [ more ]

Managing Divestiture for Value and Liquidity
PricewaterhouseCoopers (PwC), 2005

No one says you have to enjoy doing a divestiture, but you do have to work hard at it if you want to achieve your strategic and financial goals and do the job cleanly, without a tangle of liabilities and responsibilities that linger for months or years after the deal is closed. Companies sell businesses for three inter-related reasons: to meet corporate strategic goals, to take advantage of an opportunity to sell a property at its peak value or to raise cash during hard times. While these reasons seem clear enough on paper, the panelists at our corporate development roundtable will tell you that assessing when it is time to sell and then carrying it off successfully is a demanding task, fully equal in complexity to making an acquisition, although frequently less glamorous and exciting. This roundtable summary captures the key themes discussed. [ more ]

Winning Big Deals - Profitably
By Thomas Kratzert, A.T. Kearney, 2005

The larger and more complex the deal is, the harder it is to close and to price. Given the money and risk involved, sellers have a lot a stake. But by combining strategic, or consultative, selling with advanced pricing approaches, savvy sellers can win more large contracts, while earning on average 5 percent additional gross margin. The most successful sellers don't focus on specific product attributes or even solution superiority. Rather, they present a business opportunity and business case that are hard to refuse. [ more ]

Unlocking Shareholder Value: The Keys to Success (Mergers & Acquisitions A Global Research Report)
KPMG, 1999

This research report sets out to be original. Too many surveys in the past have concentrated on what is going wrong with mergers and acquisitions. We focus instead on understanding what, in their most recent deals, major international companies are getting right in the hope that their experience will provide a useful guide to companies entering into their own deals in the future and that we have the most up-to-date view on this burgeoning market. The results give us an authoritative perspective on how benefits can be delivered to shareholders. Any merger or acquisition is an extremely complex procedure from pre-deal planning, and deal completion, through to post deal integration and the extraction of value. The inevitable pressure on time and resource mean that priorities must be allocated, and hard decisions made about which activities are undertaken, and when, how, and by whom they are done. [ more ]

Growth through Acquisitions: A Fresh Look
By Patricia L. Anslinger and Thomas E. Copeland, McKinsey, 1996

LBOs outbid corporate buyers and then produce extraordinary returns. How do they do it? A study of over 800 acquisitions shatters some myths about the value of timing and leverage. Don’t do the deal if you can’t find the leader. [ more ]

M&A Due Diligence and Negotiation

M&A Due Diligence: The 360-Degree View
By John O. Nigh and Marco Boschetti, Tower Perrin, 2006

By taking a complete look at all the relevant sources of value and risk, the chances of a successful acquisition increase significantly. [ more ]

Mitigating Risks in Mergers and Acquisitions: Undertaking Due Diligence in China
By Robert Stegmann, BearingPoint, 2006

For many businesses, the question is not whether to engage in business with China but rather how to select the most appropriate entry vehicle. Depending on the degree of control needed and the complexity of your product or service, the required structure may range from purchase agreements and product licensing to joint ventures and equity acquisition of an existing business. Other drivers in this important initial decision include the amount of risk you are willing to assume, the extent of your commitment, and the markets you intend to serve. [ more ]

Reducing the Risks of Early M&A Discussions
By Seraf De Smedt, Vincenzo Tortorici and Erik van Ockenburg, McKinsey, 2005

Early discussions of mergers, acquisitions, or alliances are delicate and risky. When companies assess a proposed deal before announcing it, they must balance the need to understand its potential with the need to protect sensitive information. Unbiased third-party clean teams can protect sensitive data while assessing the business rationale of a deal, helping to develop an integrated business plan, and supporting negotiations. Companies that use clean teams can get an early and better read on potential deal synergies. [ more ]

Mergers and Acquisitions: Reducing M&A Risk through Improved Due Diligence
A.T. Kearney, 2004

For the past few years, sad stories of gigantic merger failures have been told and retold in the media – for example, the painful sagas of AOL Time Warner, Corus, and Vodafone. M&A veterans trade excruciating war stories among themselves about a multitude of smaller, less notorious disasters. What went wrong with all these deals? In trying to answer that question, analysts have scrutinized and interpreted gigabytes of information. Their conclusions: M&A failure can be attributed to poor synergy, bad timing, incompatible cultures, off-strategy decision-making, hubris, and greed. But one universal lesson has become obvious: making a "deal" work is one of the hardest tasks in business. [ more ]

Avoiding the Perils of Traditional Due Diligence
By Michael May, Patricia Anslinger and Justin Jenk, Accenture, 2002

Checking too quickly and focusing too narrowly can be a recipe for disaster. Successful acquirers take a different approach: the disciplined prioritization and organization of a number of fundamental—but often neglected—principles. Call it strategic due diligence. [ more ]

Mergers & Acquisitions: Irreconcilable Differences (Cultural Due Diligence)
By Robert J. Thomas, Accenture, 2002

Despite the penalties for failure, too many merger-bound CEOs ignore a key factor that can make or break an M&A deal: culture clash. The solution? Cultural due diligence, a systematic method for making rapid, cost-effective assessments of the cultures of both acquirer and target. [ more ]

Post Merger Integration (PMI)

Post-Merger Indigestion: Incomplete Integrations can be Hazardous to Your Company's Health
Deloitte, 2006

If your company has made an acquisition for the purpose of realizing economies of scale and maximizing operating efficiencies, but can't quite get there, post-merger indigestion may be setting in. Post-Merger Indigestion: Incomplete integrations can be hazardous to your company's health points out several warning signs that your organization may be suffering from post-merger indigestion and makes a few suggestions for treating the problem and keeping it at bay. [ more ]

Not So Fast
By Gillis Jonk and Michael Ungerath, A.T. Kearney, 2006

In merger integration, speed counts. But what exactly is merger integration speed and how does it influence integration success? Through research and discussions with executives involved in merger integration efforts, we have developed a nuanced view of speed. We believe that to achieve a successful merger integration, companies should avoid the temptation to emphasize outright speed. Instead, they should look to a set of strategic understandings of speed that center on the following pillars: There is no absolute merger integration speed; Integration speed requires a selective perspective; Integration can proceed at its own speed-recognize the differences. [ more ]

Smoothing Postmerger Integration
By Nicolas J. Albizzatti, Scott A. Christofferson and Diane L. Sias, McKinsey, 2005

After a merger or acquisition has been announced, the CFO must manage the old business while integrating the new one—often with few sources of information. Even those who understand the value of a clean team often resist appointing one, because they overestimate how much time a clean team needs to add value. Clean teams play different roles in different stages of the integration effort. A very basic clean team can meet its objectives in a matter of weeks. An effort to support integration will eventually be necessary in all mergers. Even a basic clean team can help companies complete the integration sooner—so that they can begin to reap the synergies of the merger. [ more ]

Coping With M&A Culture Clash
By Peter Haapaniemi, BearlingPoint, 2005

Learn how to cope with Mergers & Acquisition culture clash. [ more ]

Delivering Merger Synergy: A Supply Chain Perspective on Achieving High Performance
By Tom Herd, Arun K. Saksena and Terry W. Steger, Accenture, 2005

Accenture research shows that high-performance businesses pursue growth strategies that juggle the short-term priorities of today and the organizational and competitive demands of tomorrow. For many companies, M&As have an important role in the pursuit of that balance.  However, realizing the full synergy potential in a merger is an uphill battle. Some studies have noted that fully half of all mergers eventually fail to create shareholder value, and less than 30 percent create value that is noticeably higher than industry average returns. Certainly, there can be many reasons why deals have not lived up to expectations. In Accenture’s experience, one of the most critical reasons is that the companies involved typically did not pay enough attention to supply chain issues across the board—whether it was during the pre-deal M&A strategy process or during the actual merger planning and subsequent integration. The importance of supply chain to a merger’s success is supported by the findings of an international study team made up of researchers from Accenture, INSEAD and Stanford University, which was part of Accenture’s High Performance Business research initiative. The research team found that supply chain excellence is directly tied to a company’s financial performance, which is why top performers incorporate supply chain management into their business strategies. Overall results bolster Accenture’s hypothesis that the mastery of core competencies like supply chain management is a critical component of high performance. [ more ]

Taming Postmerger IT Integration
By Lisa Åberg and Diane L. Sias, McKinsey, 2004

Integrating IT platforms after a merger is always a challenge, particularly in the banking industry, in which IT is crucial to daily operations. Moving too slowly threatens the synergies promised by the merger; too rapid a change can alienate important customers. The take-away: As banks integrate their IT systems to meet merger aspirations, a migration blueprint can help CFOs balance the requirements of internal groups against the needs of customers. [ more ]

Post-merger Integration Myths Versus High-performance Realities
By Ravi Chanmugam, Pat Anslinger and Milyae Park, Accenture, 2004

Twenty years ago, few companies made acquisitions a key element of strategy; acquisitions were often an afterthought or episodic. Today, the world has changed. Some companies do 25 deals a year, and others look to achieve 50 percent or more of their growth from acquisitions. A recent Accenture/Economist Intelligence Unit global survey shows that 70 percent of senior executives are either now undertaking or planning a merger and acquisition transaction within a year. [ more ]

From Pre-Deal to All Systems Go: Eight Practical IT Integration Imperatives to Help Drive M&A Success
By Richard Chang, Gary A. Curtis, and Justin Jenk, Accenture, 2002

In spite of a softer economy and a changing business landscape, mergers and acquisitions remain a vital part of many companies’ overall strategies to attain and maintain competitive advantage. But even in the best of economic times, merger and acquisition (M&A) execution is a challenge. Statistics have shown that anywhere from 40 percent to 60 percent of M&As either fail outright or fall well short of the value they’re expected to bring. Improving the financial return for M&As, even incrementally, offers a huge potential value. New Accenture research reveals that information technology (IT) integration activities throughout the lifecycle of a merger or acquisition contribute significantly to its overall success. Companies with effective strategic IT integration are likely to achieve better financial results and more likely to describe the deal as a success. [ more ]

Keys to the Kingdom: How an Integrated IT Capability Can Increase Your Odds of M&A Success
Accenture, 2002

An exclusive Accenture research initiative demonstrates that effective IT integration has a clear and positive impact on the financial success of a merger or acquisition. [ more ]

What's the Deal? A Tailored Approach to Post-Merger Integration
By Charles F. Kalmbach, Accenture, 2001

While deal volumes and values make for happy investment bankers, consolidation presents serious challenges to executives. Accenture recently completed a survey of 100 senior executives involved in acquisitions valued at $500 million or more that closed between 1993 and 1998. The research showed that only 66 percent of acquisitions met the initial financial and strategic expectations of the corporate parents, and a mere 12 percent became true high performers.  Facing high stakes and long odds, companies considering mergers are looking for practical tools and insights into the merger and acquisition process—anything to raise performance. One survey finding was that companies need to tailor their post-merger integration approach to reflect the character of the deal. [ more ]

Post-Merger and Acquisition Integration in an Enterprise Solutions Environment
By Eric M. Gauthier, Accenture, 2001

Mergers and acquisitions are never easy. All too often M&As fail to integrate quickly, fail at operations and fail to achieve stated synergies. The stark reality is that while CEOs are under intense scrutiny to create shareholder value at all times, effective M&A execution can be the difference between creating and destroying value. [ more ]

Using the Performance Prism to Boost the Success of Mergers & Acquisitions
By Chris Adams and Andy Neely, Accenture

According to a long parade of authoritative studies, mergers and acquisitions have no better than a 50-50 chance of creating value for the acquirer. Mergers go sour for many reasons: poor strategic concepts, personality problems at the top, cultural differences, poor employee morale and incompatible information systems. But the most ubiquitous cause is the failure by management to successfully integrate the two entities. In the maelstrom of deal-making, executives invariably fail to install effective post-merger integration tracking and monitoring processes. [ more ]

After the Merger
By David Fubini, McKinsey, 2000

This three-article package examines a favorite pastime of senior executives: buying or restructuring companies. "The people problem in mergers" offers practical advice for retaining employees who are critical to the success of the new entity. Yet even managers who get the human equation right can still overlook 30 percent of the potential value of a merger. That costly oversight - the result of poor pricing strategy - is addressed in "The hidden value in postmerger pricing." Finally, "When to think alliance" studies the short-term impact of alliance and merger announcements on share values, the significance of these market reactions, and the implications for managers who must structure large deals. The take-away: The keys to a successful merger are often overlooked. Merged companies need the right people and the right pricing strategy. Their managers must also anticipate the market's reaction to announcements of mergers or alliances and know whether a deal is structured to create optimal value. [ more ]

Achieving Post-Merger Integration II
By Evelyn Bourke, Gillian Laidlaw and Ian Woods, Tower Perrin, 2000

Realising long-term benefits from a merger is much harder than obtaining short-term gains. As industry consolidation continues, insurers that learn from experience will have a big advantage. [ more ]

Achieving Post-Merger Integration
By Evelyn Bourke, Gillian Laidlaw and Ian Woods, Tower Perrin, 2000

What does it take to ensure a smooth transition following a merger or an acquisition? A survey of UK insurers reveals the capabilities needed for a successful integration. [ more ]

Successful Post-Merger Integration: Realising the Synergies
By Nils Bohlin, Eliot Daley and Sue Thomson, Arthur D. Little, 1998

Merger and acquisition activity has grown sharply in the last five years. Since 1992, annual expenditure on such activity has leaped from under $400 billion to over $1,200 billion, and there are no signs of a slowdown. The size of the deals has also grown, culminating in WorldCom's recent, record-breaking offer of $3 7 billion for MCI. [ more ]

Crossborder M&A

Lost in Translation - Avoiding Misadventure in Cross-border M&A
By Caroline Firstbrook. Accenture, 2006

More and more companies are looking abroad for acquisition targets or merger partners to help them meet their growth aspirations. While transnational deals are not uniquely prone to disaster, they do offer a different mix of opportunities and risks, which need to be understood and managed if the deals are to be successful.
[ more ]

Globalization and the Rise of Cross-Border Mergers and Acquisitions: A New Accenture/Economist Intelligence Unit Survey
Accenture, 2006

This survey, undertaken by Accenture and the Economist Intelligence Unit, examines new trends in mergers and acquisitions from US and Western Europe companies, focusing specifically on the challenges and benefits of globalization in cross-border mergers and acquisitions—a key to achieving high performance. [ more ]

Cross-border Transactions: Spotlight on Central Eastern Europe
Ernst & Young, 2006

Cross-border Transactions: Spotlight on Central Eastern Europe highlights the opportunity sectors, political context and practical realities of doing deals in the six significant countries in CEE. For foreign acquirers, CEE countries combine many of the attractions of developed economies, offering political stability; geographic proximity to Western Europe, South East Europe and Asia; and a skilled, flexible labor environment. Furthermore, CEE countries are moving closer to Western Europe transaction processes which means the business of doing deals in CEE is quicker, more transparent and less bureaucratic than in many rival investment destinations. [ more ]

Cross-border Transactions: Spotlight on China
Ernst & Young, 2006

With its escalating consumer demand, outstanding economic growth and increasing foreign direct investment opportunities, the China deal market has taken off. Cross-border Transactions: Spotlight on China provides an overview of the opportunity sectors, political context, and practical transaction considerations and challenges surrounding deal-making in this attractive Asian powerhouse. [ more ]

Cross-border Transactions: Spotlight on India
Ernst & Young, 2005

India is an increasingly attractive market for growth through transactions, according to Cross-Border Transactions: Spotlight on India. The report provides an overview of attractive sectors, political context, practical transaction considerations and challenges surrounding deal-making in this growing Asian giant. [ more ]

Doing Deals in Emerging Markets
PricewaterhouseCoopers (PwC), 2005

Companies that made investments in China years back are enjoying the fruits of their ventures today, highlighting the advantages of going global. Corporations that were once wary of investing in emerging markets are now more ready than ever to make their move. This Corporate Development Roundtable summary explores the challenges and opportunities of expanding into China and other foreign territories, and how to increase probability of success investing in volatile M&A markets. [ more ]

Making M&A Work in Japan
By Todd Guild, McKinsey, 2000

Yes, Japanese companies are governed by insider relationships and largely protected from the shareholder pressures that drive mergers and acquisitions in the West. Nevertheless, M&A activity in Japan has soared recently, especially in banking, telecommunications, and autos. Much of it has taken the form of cross-border deals that would have been hard to imagine just a few years ago. Would-be buyers from inside or outside Japan must still overcome many obstacles, including accounting standards that make it difficult to assess the value of large companies. The take-away: Companies that understand the important obstacles can make their acquisition efforts succeed. A deep knowledge of the industry in question, along with the support of key executives at target companies, is essential to consummating acquisitions successfully. It is also important for deals to focus on achieving strategic advantage rather than short-term gains. [ more ]

Dial "M" for Merger
By Rolando Balsinde and Scott Beardsley, McKinsey, 1999

With the day of the $1 trillion telco at hand, regulatory supervision is needed to solve the problems created by the European industry’s accelerating wave of consolidation. The recent battle between Deutsche Telekom and Olivetti for control of Telecom Italia bore witness to the triumph of the deregulation process now under way in Europe’s telecom industry - and to the power of financial markets. [ more ]

M&A in Asia
By Rajan Anandan, Anil Kumar, Gautam Kumra and Asutosh Padhi, McKinsey, 1998

It was booming even before the current crisis. But bargain hunting could mislead you. Three strategies to pursue. Until last year, it seemed that Asia’s economies would never stop growing. Then currencies in the region crashed, stock markets collapsed, and the International Monetary Fund was called upon to shore up the finances of several governments. The Asian miracle was over. [ more ]

Industry Speficic Issues

M&A Pharmaceutical Sector Insights: 2005-2006
PricewaterhouseCoopers (PwC), 2006

This report highlights some of the deals and developments seen recently in this dynamic, fast-moving sector. M&A remained at a high level last year fuelled by a rash of mega-deals, particularly in the pharmaceuticals segment, including three sizeable generics transactions. As the industry comes under increasing pricing pressure from governments, reduced pipeline productivity and more challenging generic competition, the scope for economies of scale on a global basis is becoming ever more important. North America was a focal point for corporate activity in the sector last year although US companies were more often targets than bidders, with a string of large pharmaceutical businesses falling under foreign control. The biotechnology segment continues to attract a great deal of interest with deals becoming larger and increasingly involving the major pharmaceutical players as they seek to boost their R&D pipelines. The trend is also towards outright ownership with a swing away from strategic alliances and joint ventures. [ more ]

M&A Retail & Branded Goods Insights: 2005-2006
PricewaterhouseCoopers (PwC), 2006

Retail & Branded Goods Insights 2005/6 is a forward-looking analysis of trends in, and drivers of, M&A activity from PricewaterhouseCoopers Corporate Finance. A dynamic market always makes huge demands on its operators - wherever they are in the supply chain. This year, with the slowdown in consumer spending, has proved no different and has been challenging to many, but also an opportunity for some. In this edition of Insights we consider recent M&A activity against this backdrop, note the re-emergence of the trade buyer and look beyond the UK to consider M&A activity in the consumer goods sector across Europe, and the increasing level of interest in the emerging market of India. [ more ]

M&A Food Sector Insights: 2005-2006
PricewaterhouseCoopers (PwC), 2006

This year’s edition includes a special focus on ethical supply chain management, an issue of growing importance for today’s food manufacturers. After a relatively quiet year in 2004, M&A activity picked up in the food sector last year with deal volumes increasing by 11%. The combined value of these deals rose by 44%. Levels of deal activity and a number of pending deals in the first quarter of 2006 indicate a positive outlook for deal flow in the food sector during 2006. Consolidation continues to be driven by the intense margin pressures placed on food manufacturers by retailers, and from the increasing energy costs that they face. In addition, manufacturers now have to contend with a wave of new requirements and expectations, particularly in terms of the nutritional value of food, its packaging, labelling and ethical sourcing. To stay ahead of the game, companies often need to achieve economies of scale and to cut costs further, for example through manufacturing in cheaper economies. At the same time, companies need to gain access to consumers in these emerging markets – notably Central and Eastern Europe (CEE) and Asia-Pacific – to counteract stagnating consumer spending in western Europe. [ more ]

M&A Wealth Management Insights
PricewaterhouseCoopers (PwC), 2006

The Wealth Management Insights provides an overview of recent M&A activity in the wealth management sector and sets out our thoughts on what the future might hold. The sector is gearing itself for a period of sustained growth driven by strong underlying demographic trends and more benign conditions in global capital markets. However, wealth management CEOs do not expect this growth to fully satisfy their aspirations. Recent years have seen a continuous and strong volume of M&A, as wealth managers seek to expand their product capabilities, achieve economies of scale in existing geographies and extend into new ones. We expect to see this volume continue into 2006 and beyond, fuelled by continued trade activity and increasing private equity interest. The overwhelming majority of deals consummated to date have been truly domestic and we do not expect this to change in 2006. However, the appetite for cross-border deals has risen, in particular investment into the UK and Switzerland is increasingly being evaluated. In addition, many firms are asking themselves how to enter new markets (such as the Middle East) and others are considering how many offshore jurisdictions they need to be in. Having experienced paying 3% of funds under management for a business with little or no profit, the industry now seems to be using a more rational approach to valuing deals. This appears to be driving convergence between vendors’ and acquirers’ views on price. Notwithstanding this, buyers significantly outnumber sellers and consequently, we fully expect at least one organisation to pay a strategic premium for that “must have” business. [ more ]

M&A Media Sector Insights
PricewaterhouseCoopers (PwC), 2006

We analyse the trends driving M&A activity in the European media sector. We also take time to review predictions from the last edition, and set out our thoughts for 2006 and beyond. Media M&A proved busier in 2005 than we expected, with significant activity in continental Europe, a high level of Private Equity involvement and a long tail of smaller corporate ‘in-fills’ driving the total number of completions to 156. Other key themes in 2005 included significant growth in demand for online marketing services and the rapid acceleration of deal activity in the online sector generally. [ more ]

M&A Technology Insights
PricewaterhouseCoopers (PwC), 2006

This report provides an overview of global M&A in the technology sector during 2005 with analysis and comment on the market’s principal trends, driving forces and outlook for 2006. Technology ‘mega-deals’ were a key feature of the market during 2005 with 14 €1bn plus transactions completed during the year. While deal volumes were on a par with 2004, these major deals combined to lift the total value of technology transactions in 2005 by nearly 90%. Software continues to lead the way, but 2005 also saw a resurgence of activity in the hardware sector whilst much of the excitement has been generated by the emerging and maturing business models around the converged internet – with Yahoo, eBay and Google almost inevitably leading the way. Blockbuster deals tend to grab the headlines but, away from the limelight, the middle-market still accounts for the bulk of technology transactions – no less than 95% of deals last year were valued at less than €500m. [ more ]

Power and Utilities M&A – Focus on North America International Mergers & Acquisitions Review 2006/07
By Deloitte, 2006

The global power and utilities sector is poised for a steady volume of M&A activity over the short-term, given the recent announcements involving high-profile North American and European mega-mergers, the repeal of the Public Utility Holding Company Act (PUCHA) in the U.S., and the privatisation and liberalisation programs within the power markets in Central Europe. Executives in the sector will be confronted with a number of issues that include the strategies used to grow revenues and the importance of due diligence and access to information when considering target companies and post-merger integration. Over the long-term, industry consolidation through M&A may be inevitable and prove to be the one strategy that many executives use to improve growth rates. [ more ]

'Urge to Merge' Fever Hits the Consumer Business Industry
Deloitte, 2006

Is it right for you and your company's business strategy? Consumer business merger & acquisition (M&A) activity is on the rise. Some companies are thinking about doing deals that might enable them to more efficiently expand operations, brands or product offerings to achieve greater critical mass. Others may be considering divestitures to prune product portfolios or spin off unrelated assets to gain financial and competitive advantage. This paper examines the current M&A environment in the consumer business industry and provides insight into how companies can better leverage M&A strategies to successfully grow their business using our M&A LifecycleTM approach. Our Consumer Business and M&A leaders discuss the necessary tools that companies can leverage to successfully plan, structure and manage a strategic platform and overall integration effort. [ more ]

Negotiating Better Cross-border Banking Mergers in Europe
By Philipp Härle, McKinsey, 2005

In Europe, cross-border bank mergers have underperformed domestic ones in creating value. Regulatory impediments and cultural differences often get the blame - but close analysis suggests that the severity of these problems is exaggerated. Managers who choose their targets carefully and negotiate firmly can buck the trend. Above all, they should try to eschew voluntary agreements that tie their hands after a bid has gone through. Experience in Central and Eastern Europe has been salutary, and recent deals in Western Europe suggest that banks are learning to take a tougher stand. [ more ]

A New Playing Field: The Emergence of Pan-European Retail Banks through Cross-border M&A
Deloitte, 2005

Over the past couple of years, the European financial services landscape has been radically reshaped by the record setting pace of merger and acquisitions activity. To better understand what has been happening, and to get some clarity on what will happen going forward, Deloitte Research has produced this new thought leadership report. [ more ]

Measuring Merger Odds for European Banks
A.T. Kearney, 2005

The pace of mergers and acquisitions is once again on an upswing. As deals become fast and furious, which are the best bets? Our study of the European banking industry points to where the smart money is. [ more ]

Forging Ahead: Mergers and Acquisitions Activity in the Global Metals Industry
PricewaterhouseCoopers (PwC), 2005

Mergers and acquisitions activity in the global metals industry A record amount of money changed hands in the metals industry last year, with 166 disclosed deals worth a total US $37 billion – more than double the $16 billion that was traded in 2003. In the first edition of Forging Ahead, PricewaterhouseCoopers has analysed mergers and acquisitions in the global metals industry throughout 2004. It has also looked at the principal trends shaping the industry and likely to stimulate further M&A activity. Our second edition, covering 2005 deal activity, will be published in April 2006. [ more ]

Power Companies Switch Strategic Direction As Deal Activity Moves Into Record Territory
PricewaterhouseCoopers (PwC), 2005

A global bounce-back in deal activity is taking place in the electricity and gas sector. Power Deals 2004, PricewaterhouseCoopers’ annual review of M&A activity in the industry, shows resurgence in confidence contributing to record highs after the extreme lows of the previous year. [ more ]

High-tech Mergers Take Shape
By Bertil E. Chappuis, Kevin A. Frick and Paul J. Roche, McKinsey, 2004

The high-technology sector displays all the characteristics of a mature industry overdue for restructuring: slowing growth, slim profit margins, fragmentation. Soon, price pressures and the changing behavior of customers will probably get consolidation going. Smaller companies will have to choose between being acquired or working within the sphere of larger vendors. The take-away: High-tech companies should anticipate the sector’s imminent restructuring by preparing for more deals - some hostile - and perhaps by repositioning themselves, through changing scale and scope, within an evolving industry structure. [ more ]

Can Banks Grow Beyond M&A?
By Kevin P. Coyne, Lenny T. Mendonca and Gregory Wilson, McKinsey, 2004

While bank mergers will pick up again, few deals are going to create the value seen in the 1990s. Instead, banks will have to find new ways to boost earnings, such as developing more compelling value propositions to compete with the nonbanks and specialists that have been gaining ground in many markets. Banks will also have to raise their performance the old-fashioned way—by improving productivity. This approach will become vital as their payments businesses shrink with falling usage of checks. The take-away CEOs who expect a recovering economy to bring back the merger heyday of the 1990s actually face a more diverse and complex agenda. New growth and productivity initiatives will replace megadeals as the cornerstone of most banks’ strategies to create value. [ more ]

More Restructuring Ahead for Media and Entertainment
By Bernard T. Ferrari, Neil W. C. Harper, Luis A. Ubiñas, Michael J. Wolf and Michael P. Zeisser, McKinsey, 2003

Despite recent broad declines in the major media conglomerates' valuations, they continue to embed expectations of substantial long-term growth. Significant near- and midterm challenges will make it hard for such companies to perform at the level needed to justify these valuations, and organic initiatives alone probably can't meet the expectations they reflect. An industry hampered by the tremendous disruption from new digital technologies, a changing regulatory framework, and a difficult capital market environment is likely to require a combination of levers. The take-away Operational improvements and organic growth will continue to be critical in the media and entertainment industry. But its companies also need a carefully constructed and strategically rational M&A and divestiture program to meet the market expectations embedded in today's share prices. [ more ]

Europe's Banks: Verging on Merging
By Olivier Hamoir, Carl McCamish, Marc Niederkorn and Christopher Thiersch, McKinsey, 2002

So far, limited synergies among European banks have made it difficult to negotiate cross-border mergers. Although the obstacles to them are disappearing only gradually, pressure from shareholders is likely to force banks to merge even before the obstacles have vanished. To clarify the cross-border strategies of banks and to help them plan successful mergers, the authors have visualized an ideal European banking landscape once these obstacles are gone, perhaps in ten years—a landscape including the types of banks that will thrive and the number of institutions in each category. In this future, specialists in regional distribution, pan-European product development, and global or pan-European wholesale banking will probably dominate. They will be supported by huge regulated monopolies providing the necessary infrastructure, such as payment platforms and stock exchanges. The take-away: European banks that choose their potential specialties now are more likely to find the right merger partners and to stay in the top league in the long term. [ more ]

The Limits of Bank Convergence
By Alastair J. Cairns, Jonathan A. Davidson and Michal L. Kisilevitz, McKinsey, 2002

Is the convergence of commercial and investment banks inevitable? Many commercial and universal banks would like to think so, and in fact they continue to grab an increasing share of the investment-banking market. But these institutions will truly threaten investment banks in their core franchise only by building superior investment-banking skills and capabilities, not by offering clients cut-price loans as a loss leader. Meanwhile, leading investment banks can retain their market position without resorting to large-scale mergers with commercial banks - if they ramp up to supply clients with credit selectively. The take-away: Commercial and investment banking are not as complementary as conventional opinion seems to think. Banks in North America are likely to find that the current craze for bundling credit with investment-banking services will prove a cyclical fad rather than a winning long-term strategy. [ more ]

Media Mergers: The Wave Rolls On
By Michael J. Wolf, McKinsey, 2002

Strategic and financial factors suggest that the era of media mergers is far from over. More than 100 media companies around the world have upward of $1 billion in revenues, and the entertainment and media businesses are still fragmented compared with other industries such as pharmaceuticals and aerospace. The cooling of equity markets has left most major media companies trading at elevated stock market prices based on cash flow multiples that can't be justified by growth alone. What investors are counting on, and executives are pursuing, is a burst of revenue through new digital services. The take-away: M&A in the media industry seems likely to accelerate following a US court decision removing the rule prohibiting media companies from owning cable systems and local broadcasters in the same market. As a corollary of the next merger wave, even the biggest and most acquisitive companies are simultaneously looking to sell businesses that no longer fit the strategic bill. [ more ]

Riding the Pharma Roller Coaster
By Catherine George and J. Michael Pearson, McKinsey, 2002

The best way to create value in the pharmaceutical industry is to maintain a flow of innovative medicines, says Pharmacia's chairman and CEO, Fred Hassan. But it can cost $500 million to turn a discovery into a product, and these hefty research and development costs have fueled recent mergers; after all, only big companies can afford the necessary R&D budgets of $2 billion or more. In this interview, Hassan tells how he managed Pharmacia's mergers with Upjohn and Monsanto without losing a focus on frontline sales. The take-away: The key to a successful merger is building trust, says this CEO who has overseen two large integration efforts. Transparency, a prudent assessment of risk, and decisiveness are also important, along with a plan that rolls out changes in waves rather than all at once. [ more ]

Learning from High-tech Deals
By Kevin A. Frick and Alberto Torres, McKinsey, 2002

Mergers and acquisitions, especially in the high-tech sector, are a favorite target of business pundits and academics, since many studies show that up to three-quarters of these deals destroy value. But if they are so unproductive, why are the most successful high-tech companies the most prolific deal makers? A study of 485 companies shows that high performers pursue their transactions as part of a disciplined and ongoing program, link their transactions to clear strategic goals, and are organized for fast decision making and effective implementation. The take-away For most companies, acquisitions and other transactions are occasional, major events. For the top performers in high tech, deal making is an ongoing business process. In an industry that virtually requires companies to do deals, that kind of proficiency is a huge competitive advantage. [ more ]

Shopping in the Internet Bargain Basement
By David H. Dorton, C. Brent Hastie and Patrick Q. Moore, McKinsey, 2001

In what is shaping up as a dismal year for the Internet sector, at least 450 Internet companies closed their doors during the first nine months of 2001, nearly twice as many failures as in all of 2000. As valuations plunged, failing dot-coms have become acquisition targets for better-positioned companies eager to take advantage of bargain-bin prices. But acquirers rummaging through the Internet's bargain basement should temper their enthusiasm with caution. The spectrum of options to choose from is much broader than typical M&A, and there is much less data to help sort it out. [ more ]

Sizing Power
By Tera Allas and Keith Leslie, McKinsey, 2001

The power companies’ urge to merge probably makes them weaker, not stronger. Chief executive officers of power companies are rushing to acquire and consolidate the competition. Extra mass, it is thought, will give them more clout in the marketplace and protect them against hostile acquisitions. While there might be some truth in this argument, greater size does not in itself guarantee higher returns for shareholders. The obvious benefits of size for any power company come from economies of scale, which are reaped at the business unit rather than the company level. Moreover, not all businesses in the power industry benefit from scale. Any CEO contemplating a merger or acquisition should be aware of both the extent to which economies of scale differ along the value chain and the disadvantages of size at the corporate level. [ more ]

M&A Won’t Save Japanese Banks
By Yuko Kawamoto, McKinsey, 2000

Japan’s government is finally forcing the country’s financial sector to restructure after years of ever higher nonperforming loans and terrible performance for shareholders. In 1999, it made direct capital infusions of $92 billion and allowed several banks to fail. It also indirectly suggested that Japan had room for only three or four global banks, not the two dozen it then had. In August 1999, Dai-Ichi Kangyo Bank, Fuji Bank, and the Industrial Bank of Japan (IBJ) announced plans to merge, an announcement followed by the merger of Sumitomo Bank and Sakura Bank. The number of banks had shrunk from 21 to 10 and is now down to 8. [ more ]

Bagging Europe’s Groceries
By Pierre Gurdjian, George Kerschbaumer, Michael Kliger and Johanna Waterous, McKinsey, 2000

Bagging Europe’s groceries European grocery stores are likely to consolidate in one of two ways: either a champions’ league of pan-European behemoths or a set of strong regional fortresses. Success for market participants depends on three factors: managing knowledge, attracting and developing talent, and extracting savings through international purchasing. The last component is especially critical and will require players to seek out better prices, streamline the supplier base and product variety, and influence manufacturers. The take-away: To make it into the champions’ league, Europe’s leading food retailers will need to acquire a different skill set that enables them to extract value on a multinational playing field. [ more ]

Making a Meal of Europe’s Food-and-drink Business
By Peter M. Freedman, McKinsey, 2000

Consolidation could create more than $100 billion in net present value in the fragmented European food-and-drink industry-and that makes restructuring almost inevitable. While many industries in Europe are consolidating and restructuring, one of the largest and most fragmented sectors - the manufacture of food and drink - has been relatively untouched. Indeed, the top ten food-and-drink producers in Europe’s leading countries still account for only about 14 percent of the market—a low level compared with industries such as grocery retailing (42 percent) and pharmaceuticals (35 percent). Meanwhile, the proportion of the industry’s market capitalization involved in merger-and-acquisition activity remains one of the lowest. [ more ]

Bank M&A: Historic Opportunities, but not for the Fainthearted
By Nicolas Leung, Jean-Marc Poullet and Timothy Shavers, McKinsey, 1999

The long-awaited M&A boom is coming, and it will reshape the competitive landscapes of Asian banking. The boldest and best players can emerge as winners, but only if they overcome the unique challenges of M&A in postcrisis Asia. Most observers believed that a crisis-driven boom in Asian bank mergers and acquisitions would start in 1998. They were wrong: in the nine key markets of emerging East Asia - China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand - private-sector bank M&A remained roughly flat in 1998, at around $5.6 billion. That is comparable to the levels of 1996, before the crisis. Yet the forces driving this merger boom that never came didn’t go away; they intensified. The M&A boom is already starting, and over the next two years it will hit with a vengeance. By the time this wave has passed, a third to a half of Asia’s banks will either acquire other banks or be acquired by them. Every player in the region must consider the strategic implications of the changes that are about to occur. The boldest players will seize this brief window of opportunity to reshape Asia’s banking industry and become the new leaders of what will probably be the world’s fastest-growing financial services market over the next ten years. [ more ]

A New Formula for European Chemicals
By Markus Aschauer, Christophe de Mahieu, Philip Eykerman and Michael Graham, McKinsey, 1999

In a globalizing market undercut by the Asian economic crisis, consolidation is the only answer. Europe’s commodity chemical sector has again entered a downturn. Opportunities for arbitrage mean that chemical prices around the world are increasingly set on a global basis. The crisis in Asia therefore spread quickly to other regions and produced an international slump, sharply cutting global demand and prices for most petrochemical products, including all of the major plastics—notably polyethylene, polypropylene, and polyvinyl chloride. Representing about a third of total chemical sales, these low value-added, cyclical products are used for a wide variety of applications: automobiles, bottles, packaging, and pipes, to name just a few. [ more ]

Payor or Preyer?
By James Kalamas, Gery Pinkus, Ning Wang and Roger Zino, McKinsey, 1999

The M&A frenzy among HMOs will continue. Either hunt or be hunted. Needed: $2 billion in market cap protection. When the planned tie-up between two US health management organizations - United Healthcare and Humana - collapsed last summer, some Wall Street analysts breathed a sigh of relief, glad that these two big health maintenance organizations (HMOs) would not have a chance to augment the already large catalog of failed mergers. PacifiCare’s troubled 1996 acquisition of FHP, for example, led to a 40 percent decline in operating margins. Aetna’s excessively expensive purchase of US Healthcare destroyed up to $500 million of market value within a month of the deal’s completion. [ more ]

M&A Malpractice
By Grace Colón, Ajay Gupta and Paul Mango, McKinsey, 1999

Hospital mergers rarely produce the expected benefits. Market power, leverage over prices, and cost reductions have all eluded most of the consolidators. So why do some of them succeed? In the five years leading up to 1998, executives and boards of US hospitals - convinced that if they grew larger they would be able to draw more patients, to leverage significant economies of scale, and to command higher prices from payors - consummated nearly 750 mergers and alliances. [ more ]

Playing to the endgame in financial services
By Madeleine James, Lenny T. Mendonca, Jeffrey Peters and Gregory Wilson, McKinsey, 1997

here are many deals and more consolidation ahead. Ultimately, the model may be airlines or aerospace. Size will count, but success will require more than empire building. Every week brings news of another financial services acquisition in the United States. Such events act as a reminder, if one were needed, that this massive and diverse industry is undergoing unprecedented consolidation. [ more ]

Building Hospital Market Power through Horizontal Integration - Is it Working?
By Milt Gillespie and Aileen Lee, McKinsey, 1996

1995 saw a huge leap in the number of hospital mergers and alliances in the United States, primarily in response to the expansion of managed care systems that have forced down hospital prices and utilization rates. Multihospital systems, however, do not necessarily outperform independent hospitals. [ more ]

Pharmaceuticals - The Consolidation Isn’t Over
By William R. Pursche, McKinsey, 1996

Overcapacity still costs the industry almost half its value. What premiums? Savings can amount to 40 percent of an acquisition’s costs. Could all medical needs be met with 247 drugs? These are uneasy times for pharmaceutical companies. Many of the industry’s traditional ways of making money are gone. Generic drugs are gaining increasing acceptance, contract sales are undermining the role of direct selling, and companies can no longer introduce a me-too drug and expect a "fair share" of the market. [ more ]

Human Resource (HR) Related Aspects

Why HR Can Make or Break Your M&A
By Andrew F. Giffin and Jeffrey A. Schmidt, Tower Perrin, 2002

In implementing an M&A, most managers focus on the financials. But success often hinges on how you deal with people issues and cultural integration. Is your HR unit up to the task? [ more ]

The Role of Human Capital in M&A
Tower Perrin, 2002

This white paper, written by Towers Perrin in co-operation with the Economist Intelligence Unit, argues that success is attainable if HR issues are given the management attention they deserve. The global survey of senior executives indicates that M&A deals aren’t easy, but succeed more often than is commonly believed. HR experts have tremendous value to add and results suggest that the more capable the HR department and the more involved they are in the M&A process, the greater the chances of success. When mergers fail, however, it is often due to the "softer" management issues of integrating different cultures and workforces. [ more ]

The People Problem in Mergers
By Ira T. Kay and Mike J. Shelton, McKinsey, 2000

Although three-quarters of the executives who have lived through mergers agree that retaining key talent is critical to successful integration, these talented people usually receive job inquiries within days of a merger announcement. To keep essential employees in a time of uncertainty, you should identify them before a deal is announced, establish clear guiding principles for selecting managers in the new company, and provide attractive (and intelligently structured) financial incentives for those you want to keep and for those who will have to depart. The take-away: People problems are a major cause of failed mergers. Indeed, one of the few certainties in the M&A process is that essential employees will be tempted to jump ship. To keep them onboard, managers must move quickly, communicate clearly, and share information—as well as financial rewards. [ more ]

Other Issues

Learning to Let Go: Making Better Exit Decisions
By John T. Horn, Dan P. Lovallo and S. Patrick Viguerie, McKinsey, 2006

Faced with a failing product or division, companies tend to hang on too long. Common psychological biases help explain why executives downplay evidence of failure and put off the tough decision to bail out. Executives can learn to identify those biases and to understand when they are likely to hinder an objective evaluation of the prospects of a product, a business unit, or even an entire industry. Companies can create mechanisms - some borrowed from private equity firms - to counteract their biases and help them move toward the exit at the right time. [ more ]

Merging Alliances: Ignore at Your Own Risk
Deloitte, 2006

With U.S. companies pursuing alliances, joint ventures and/or partnerships in record numbers, most merger & acquisition (M&A) transactions are bound to involve dozens if not hundreds of strategic business-to-business relationships. Yet few merging companies devote as much time and effort to integrating alliances as they do to combining personnel, processes, technology and physical facilities. The potential price: damaged relationships, confused customers, possible legal and regulatory complications and an erosion of the marketplace leverage the alliances were meant to provide. The good news is that a little foresight and planning can go a long way toward getting a newly merged entity’s alliances under control. Here are six tips that can help you overcome some common alliance-related pitfalls in a post-transaction integration. [ more ]

Driving Speed to Value from an M&A Growth Strategy: Establishing an In-house Merger Integration Capability
By Jill Dailey, Ana Dutra and Donna Peters, Accenture, 2006

After suffering from a post-dot-com era hangover, the global mergers and acquisitions market is thriving again. More companies are now "serial acquirers" that plan to pursue a series of deals to fuel growth for years to come. Accenture believes that, for companies using acquisitions as an instrument of growth, an internal merger integration core capability is essential to capture and preserve maximum value from each deal. [ more ]

The Effects of Politics on Energy M&A: Central European and CIS Regions
Deloitte, 2006

Fifteen years after the fall of the iron curtain, a look at how energy liberalisation and privatisation have helped boost once emerging nations to the ranks of the EU. Government sponsored privatisation and market liberalisation programmes have provided the opportunity for investments in what were once state-owned monopolies. Major European energy companies have announced plans to expand eastward to Central Europe, which appears to indicate not only that Western Europe has consolidated to the point where the number of potential acquisition targets has been reduced, but also that Central Europe is a better fit for their current long-term strategies. Moreover, Russian majors and regional players are seeking acquisitions in Central Europe and western companies are investing in Russia and the CIS. Based on current high commodity prices, these trends are likely to accelerate in the near future. [ more ]

Leading Change: An Interview with the CEO of Banca Intesa
By Giancarlo Ghislanzoni and Julie Shearn, McKinsey, 2005

In this interview, Corrado Passera describes the turnarounds at Poste Italiane, Italy's state-owned post office, and Banca Intesa, the country's leading bank. Each case was different, but common themes emerge: the need to rediscover earlier roots of success, the importance of balancing sacrifices with benefits, and the challenge of managing internal and external expectations. Passera's experience shows that change initiatives work well only with a well-functioning top team and committed leadership across the organization. He is convinced that executives need to manage restructuring and growth at the same time. [ more ]

Merger Valuation: Time to Jettison EPS
By Richard Dobbs, Billy Nand and Werner Rehm, McKinsey, 2005

Under new accounting rules, few if any aquisitions appear to dilute earnings per share - but this doesn't mean that acquisitions are any more likely to create value. Even those that appear to increase a company's earnings per share can actually destroy it. The take-away: In view of the changed accounting rules, executives and directors should stop using earnings per share as a proxy for how much value an acquisition will create and focus instead on more reliable measures, such as a deal's impact on economic profit. [ more ]

Who Should Manage the M&A Process?
Towers Perrin, 2005

Our panelists engage in an informative discussion of individual company approaches to managing the M&A process and share their experiences on what has been most successful. We look specifically at the pros and cons of centralized versus decentralized approaches and also examine the role of outside advisors. [ more ]

Corporate Development Officer European Study
Ernst & Young, 2005

European companies are increasingly concerned about the competition they face for strategic acquisitions from private equity funds. If corporates are to be successful in combating competition from such deal-specialist companies they may have to make the transaction discipline a core capability. This is one of the findings from the 2005 Ernst & Young Corporate Development Officer European Study. [ more ]

Not by M&A Alone
By David Ernst and Tammy Halevy, McKinsey, 2004

As the high-tech sector restructures, boards and executives should think beyond acquisitions and consider joint ventures and other kinds of alliances. The take-away An alliance makes sense when a company wants to become involved in a bu