Business associates reviewing notes together in a meeting.

Double double, toil & trouble — the perils of mergers and acquisitions

November 3, 2015

merger-acquisitions

Double, double toil and trouble;

Fire burn, and caldron bubble.

Market makers, business moguls and shareholders all crave growth—but at what cost? Many look to Mergers & Acquisitions to drive growth and profitability. However studies show over two thirds fail to deliver the value initially identified.

Like the three witches in Shakespeare’s Macbeth they mix a mighty brew hoping for a magical potion. Companies often throw different entities into their corporate broth:

In the caldron boil and bake;

Eye of newt, and toe of frog,

Wool of bat, and tongue of dog.

Hoping this island of misfit toys will create the perfect recipe:

For a charm of powerful trouble,

Like a hell-broth boil and bubble.

Double, double toil and trouble;

Fire burn, and caldron bubble.

Then you are faced with the post merger integration phase and those elusive “synergy benefits”? (Most employees translate these to mean job cuts. They are often not wrong).

Here’s the reality. Expectations get set. Promises have been made. Fancy terms like “accretive benefits” have been widely bandied around and it us up to you to make it happen!

Here at SBTI we understand the need to “double” and know that it comes with “toil” but can be achieved with less “trouble”. What we have found is most improvement efforts focus below the line, on short term cost reduction. This is all fine and dandy and can impact the quarterly results promised in the acquisition thesis, but is not a sustainable source of improvement.

We encourage our clients to look “above the line”–the two main levers are revenue growth and Cost of Goods Sold. Why focus on “below the line costs” (yes most of them are usually people related so you know how that story unfolds), when you have a much bigger bucket of COGS? Secondly we are always shocked to find that efforts to improve cross selling are woefully underdeveloped.

If you are struggling with post merger integration or are looking to evaluate a potential acquisition please give us a call.

Our initial consultation is completely free. We can’t help everybody but we’d like to hear your story to see if we can help you. If you’re frustrated by the way things are going, we’ve likely already solved the exact problem you’re dealing with. Our average consultant has spent more than 20 years in your shoes.

SBTI has created more than 50 billion dollars in shareholder value for some of the worlds leading companies, and helped them successfully navigate the perils of post merger integration and turn it into positive growth.

Give us a call today and lets talk. Our three-step process begins with a free listening session. Call us at 704-904-0994

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