Deloitte finds Key Differences in M&A Outlook

Date: 14-11-2007
Source: PR Newswire

"Strategic Acquisitions Amid Business Uncertainty: Charting a Course for Your Company's M&A," a new report by Deloitte Research based on a survey conducted by the Economist Intelligence Unit (EIU), warns that some companies may be overlooking four potentially troublesome issues when evaluating their M&A options in building value for their investors.

“The deal environment has changed in recent months,” said Jerry Leamon, Global Managing Partner, Merger & Acquisition Services, Deloitte Touche Tohmatsu. “But companies still need to make decisions about acquisitions and divestitures based on market facts and business logic.”

The report identifies four areas where problems may arise, including the company's approach to M&A, the effect of a deal on achieving overall strategic goals, input into the company's M&A decisions, and the organization's deal execution capabilities. Based on significant differences in how successful and less successful acquirers approach these areas, the report draws conclusions for companies evaluating their M&A options:

-- Don't drift with the M&A current. Respondents who admitted their
companies seldom meet their M&A goals ("low achievers") were almost as
enthusiastic about doing more deals as were respondents who said they
do well at M&A ("high achievers"). Low achievers likewise exhibited
what now appears as questionable optimism about the effect of factors
such as the business cycle, exchange rates, and interest rates. Low
achievers may be more subdued today, but taking cues from the
prevailing mood isn't the way to make M&A plans.

-- Consider the long-term strategic implications of M&A. The survey
results show that low achievers tend to undervalue the importance of
having the right deal strategy. Only 32 percent of low achievers cited
defining the acquisition strategy as a crucial pre-acquisition task.
But even a well-defined strategy can be vulnerable if it relies on one
view of that the future may hold - for example, the high level of
turnover among national leaders in major capitals calls into question
what lies ahead in areas of government policy that affect deal
economics.

-- Give full consideration to different points of view. Low achievers
reported that their CEOs and boards dominate M&A decisions at the
expense of those with a practical business perspective, notably
business unit heads and managers from finance and accounting, marketing
and sales, operations and production, and IT. They also signaled
concern about insufficient attention to activists, government, unions,
and media. High achievers were much more comfortable with their
organizations' M&A decision-making.

-- Be sure that M&A follow-through capabilities are strong. Low achievers
ranked getting things done rapidly as the most crucial deal management
task, and also emphasized naming the right leaders. High achievers gave
more weight to defining the integration plan and establishing a
measurable definition of deal success - suggesting they think it is
more important to set sail with a good map and compass.

The report is based on a survey conducted earlier this year by the EIU of 276 M&A strategic acquirers and advisors based primarily in Europe, Asia-Pacific and North America.

"Whether it makes sense to proceed now with an acquisition depends on factors that are specific to each company's plans, markets, and finances," said Dwight Allen, a director with Deloitte Research and author of the report. "The important thing is to make the decision carefully and objectively, with due attention to all the relevant viewpoints and considerations - that makes it more likely strategic acquisitions will be truly strategic."

To download the full report, please visit www.deloitte.com/us/M&Asurvey