A new KPMG study re-confirms that due diligence and planning & rigour in M&A integration pay off in ensuring deal value realisation, especially in Asia.
Looking at deals between June ’07 and July ’09, the study found that 40% of deals were value enhancing, 20% neutral and 40% resulted in value destruction (compared to global value destruction rate of 32%). The majority of deals are being done to increase growth, as opposed to the previous focus on cost reduction.
This new focus on growth, especially towards Asia, results in new requirements in M&A (and JV) value realisation which is borne out by experience and the study’s research:
- Due diligence focused on future growth plans & how those plans will be achieved
- Managing a greater shift to multinational M&A – bringing with it increased complexity & concentration on HR/people & cultural integration issues
- Increased rigour in tracking, analysing & reporting on success of achieving growth & revenue synergies (including deciding from where in the organisation this is driven from)
- Ensuring a drive for faster implementation / integration (depending on strategy) – which entails having a detailed plan in place to execute upon
While much of this is not new, it is important to re-iterate that increased concentration in a few areas can radically increase deal and shareholder value. Let’s see how Nestlé and Diageo (and indeed Chinese firms) do on recently announced deals.
Tags: M&A / JV
