By Raanan Zilberman, CEO, Eden Springs
The failure rate of mergers and acquisitions is running at over 80 per cent — so, what can management teams do to improve their success rate?
• Never buy a business just because you think you can manage it better than the incumbent. In my experience, too many businesses assume they can run their competitors’ companies better than them. In reality, this is rarely the case. Never underestimate the knowledge and skills of your competitors. You may be able to raise the funds to acquire their business, but this does not always translate into better management. Respect your competition and retain their experience and know-how during and after the M&A process. A little humility goes a long way!
• Speed is the key to successful integration and M&A success. It is important to set clear goals for integration and value realisation. We have developed a platform for acquisition that we've named '90:90'. In 90 days, we aim to bring 90% of the marginal contribution we have planned for the new target. Together, after years of practice, we've learned to respect the advanced detailed planning together with the precise implementation, and above all we believe that the key success factor is the 'speed of execution'.
• Adopt best practice — wherever you see it. Don’t miss the opportunity to adopt new systems or processes from any part of the new acquisition into your existing business. A lot of acquiring businesses assume their target has nothing to teach them. I’ve picked up huge amounts of value by spotting innovations — in areas such as credit control management or product developments — and folded these processes into my business.
• Forensic due diligence — focus on the deal detail. From day one of completion, you should have a thorough understanding of value realization from the deal. This means being able to express in financial terms what ‘success’ will look like. It’s not as simple as revenue from new customers that you have bought via the deal, it’s a bout that extra value that the deal can bring. For us, it’s about the added opportunity to offer a complete portfolio of drinks to our growing customer base, above and beyond the traditional water cooler.
• People are vital. It is easy to be drawn into the balance sheet and cashflow analysis of a deal, only to overlook the importance of the human capital. While it’s vital to retain the relevant knowledge and skills from the senior team at the incumbent, ensuring that the wider workforce is fully informed is important too. While reporting restrictions need to be respected — especially where listed companies are involved — face to face briefings, internal newsletter and video can all be used to keep employees on both sides updated on progress of the merger.