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Cracking the code to post-deal integration and synergy capture
Thomas Fossum, Partner and Head of M&A Integration & Carve-out at PwC, references research conducted in 2015 with 350 acquirers about how synergies are perceived in deal success.
Thomas was asked to shed some light on what happens in a transaction after the lawyers, bankers and accountants leave. Or in other words, post-merger & synergy capture. His presentation at the Nordic M&A and Private Equity Forum 2016 looks at these findings.
"As multiples include synergy potential, cracking the code to successful integration & synergy capture becomes even more important." The study echoed this statement, as 76% of buyers say synergies constitute a key deal success factor...But, when shifting focus from synergy calculations to synergy realisation, only 46% reach their targets. With that in mind, he dives into the what, when and who factors to find out whats going wrong.
What makes them fail?
- The degree of integration, time and effort required varies a lot from function to function. This is often over looked in the transnational team's calculations.
- Acquirers chasing synergies start with changing the corporate functions and back office support function, because they're easier to slice cost. However to capture the best synergies from other departments, you probably need these departments...But they've gone!
- If the sum of the synergies relative to the buyers cost is low, the capture usually goes well. Same going for a high cost ratio. The problem is in the middle.
When is the right time?
Most companies in the study were hoping to achieve their peak synergies within the first year. However, only 10% achieved this. The key contributing factor being that 'difficult' discussions during the transaction period were postponed. Resulting in significant delays in integration & synergy capture.
Who is responsible?
A significant part of the gaps between “planned” and “did”, are found in roles & responsibilities. The study shows that the greatest gap occurred in management commitment, which is essential for driving cost and revenue.
In conclusion, the bottom line to shorter time-to-synergies starts with clarifying the integration fundamentals. Those who capture the synergies quickly and clearly will see the best results.
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Data in this article are provided by PwC
Published: 11 March
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Thomas is a member of PwC Sweden's leadership team, responsible for Deals Services, the largest provider of transaction services, M&A, valuation & financial modelling, carveouts & merger integrations, deal strategy, restructuring, and M&A Tax and Legal, in the Nordics.
Having planned and executed post merger integrations and carve-outs for almost 20 years, Thomas has extensive experience from M&A driven transformations, often with significant growth ambitions, structural changes and cost synergies capturing.
Most of Thomas’ client engagements are in a multi-functional and multi-national setting, making the ability to prioritise and coordinate across often conflicting needs, national legislation and cultural differences an imperative. Recurring clients include large Nordic corporates and Private Equity companies.
Thomas holds a Diplom-Kaufmann degree from the University of Mannheim, Germany. A native Norwegian, he speaks English, German, and Scandinavian.