When you're involved in a restructuring merger or acquisition, you're faced with many challenges and opportunities to improve the performance and value of the combined entity. But how do you decide which improvements to prioritize and implement first? Here are some tips to help you make the best decisions for your restructuring M&A project.
Before you can plan any improvements, you need to understand the current state of both the acquirer and the target. This means conducting a thorough due diligence process that covers financial, operational, strategic, legal, and cultural aspects of both businesses. You also need to identify the sources of value and synergies that the deal aims to achieve, as well as the risks and costs involved. By assessing the current state, you can establish a baseline for measuring and tracking the progress and impact of your improvements.
Take the acquisition of LinkedIn by Microsoft in 2016 for $26.2 billion. Before the deal, Microsoft carried out extensive due diligence. They reviewed LinkedIn's financial statements, assessed their technology stack, and considered legal obligations. This in-depth review helped Microsoft identify key synergies, like integrating LinkedIn's social network features into Microsoft's suite of productivity tools. Post-acquisition, Microsoft reported a 37% revenue increase from LinkedIn, validating their initial assessments and due diligence. Post-merger integration" is crucial for realizing synergies. According to a report from McKinsey, 70% of mergers fail to achieve their expected synergies, often due to poor post-merger integration.
Once you have a clear picture of the current state, you need to define the future state of the combined entity. This means setting the vision, mission, goals, and strategy for the new organization, as well as the structure, processes, systems, and culture that will support them. You also need to align the expectations and interests of all the stakeholders involved, such as shareholders, customers, employees, suppliers, regulators, and competitors. By defining the future state, you can create a roadmap for your improvements and communicate them effectively.
When Disney acquired 21st Century Fox in 2019 for $71.3 billion, they had a clearly defined future state. Disney wanted to bolster its content and streaming services, competing better with services like Netflix. Post-acquisition, Disney+ saw a boost in its subscriber base, jumping to over 100 million subscribers as of March 2021. The vision, mission, and goals were all set toward that end, successfully. The role of transition teams, specialized groups within a company responsible for navigating the merger or acquisition is crucial. According to a Harvard Business Review article, effective transition teams can help increase the deal's success rate by up to 30%.
Now that you have a roadmap for your improvements, you need to prioritize them according to their urgency, importance, feasibility, and alignment with your value drivers and synergies. You can use various frameworks and tools to help you prioritize, such as the Eisenhower matrix, the MoSCoW method, or the RICE score. You also need to consider the interdependencies, trade-offs, and risks of each improvement, as well as the resources and capabilities required to implement them. By prioritizing the improvements, you can focus on the ones that will have the most impact and value for your restructuring M&A project.
In 2008, JPMorgan Chase acquired Bear Stearns. One of the immediate priorities was stabilizing Bear Stearns' rapidly depreciating asset base. JPMorgan engaged in rapid risk assessment and prioritized actions that could prevent further financial loss, including immediate layoffs and asset sales. This allowed JPMorgan to stabilize Bear Stearns and focus on long-term integration. According to a McKinsey study, nearly 50% of all decisions in an M&A process are altered based on real-time updates and changes. That's a significant percentage and underlines the need for adaptability in any M&A process.
The final step is to implement the improvements according to your roadmap and priorities. This means assigning roles and responsibilities, setting timelines and milestones, allocating budgets and resources, and monitoring and reporting on the results. You also need to manage the change and integration process, which involves engaging and communicating with all the stakeholders, addressing any issues or conflicts, and ensuring a smooth transition. By implementing the improvements, you can realize the benefits and synergies of your restructuring M&A project and achieve your desired future state.
When Disney acquired 21st Century Fox in 2019 for about $71 billion, the integration process involved not just asset acquisition but also cultural integration and streamlining of operations. Disney had a clear roadmap and initiated processes like reallocating budgets, setting new roles, and dissolving redundant positions. They even had a post-acquisition milestone of launching Disney+, which incorporated content from Fox. The successful execution allowed Disney to strengthen its content library and user base significantly. In the real world, effective implementation requires ongoing adjustments. According to a study by KPMG, 83% of M&A deals fail to boost shareholder returns, partly due to poor implementation and lack of agility.