Mergers and acquisitions are complex enough. Finding out how much value they deliver can be even harder.
Between 70 and 90 percent of mergers and acquisitions fail. Here’s why, and how the right PPM solution can help you reduce risk and get more from your M&A.
Some of the biggest companies in the world grow through mergers and acquisitions (M&A), especially in the technology sector. And those that do so successfully see significant benefits. Over the last year alone, over $2835.5B changed hands during M&A transactions, and I doubt so much spending would be going on if these mergers and acquisitions weren’t paying off.
But the risk is high as well. In fact, one body of research estimates between 70 and 90 percent of mergers and acquisitions fail. This figure is already alarmingly high, but what’s more concerning is that these are just the failed M&A activities businesses know about. What about the M&As business leaders don’t see? It’s these invisible missed opportunities that pose the greatest threat.
In this blog, we’ll look at why so many M&As fail to deliver the intended benefits, and how business leaders can get the oversight they need to understand why problems arise, learn how to spot them sooner, and take corrective action before a merger or acquisition fails.
What’s the real value of your recent merger or acquisition?
It’s easy to put a value number to the cost of an M&A transaction:
- Vodafone paid $180.95B to purchase Mannesmann AG in 2000
- American Online and Time Warner’s merger was worth $165B in the same year
- Verizon Communication’s takeover of Verizon Wireless in 2013 was valued at $130B
These are some of the biggest M&A examples in history, but all mergers and acquisitions often come with a similarly large up-front cost.
But how do you begin to unpack the full value a merger or acquisition delivers? Yes, you can track things like new product line revenues and stock price increases. But can you put a value on the new knowledge and skills in your teams, or the new intellectual property your business acquires?
Then there’s the more abstract elements of a merger, the things that are truly priceless. How can you know if your M&A is executed in a way that meets your vision for the business? How will new people and processes impact your company culture?
All leaders engaging in M&A activities should have a master plan, including an itemised list of programmes to help achieve the financial and cultural goals of your merger or acquisition. The question then, is how do you go about tracking the progress of each of these activities?
The many facets of M&A demand diverse data points
When you’ve spent a significant portion of CapEx on a merger or acquisition, you want to know it’s delivering value. And to know this, you’ll need to answer some tough questions:
- Are new employees getting up to speed quickly?
- Are new product lines rebranded and ready to start generating revenue?
- How much have you spent (and how much more do you need to spend) managing change across the enterprise?
That’s just the beginning. You’ll also need to quickly understand if anything is blocking M&As from delivering value, or adding too many costs to your operations. For example, have you collected legacy systems from an acquisition that are now reducing efficiency and increasing your overheads? Is a culture clash preventing teams from collaborating and maximising productivity?
These are all simple questions on the surface, but answering them demands data from across your entire portfolio of projects, products and personnel.
A comprehensive, flexible PPM solution is key
Business leaders already rely on project portfolio management (PPM) tools to see how crucial initiatives are progressing, and the value they’re delivering. So why wouldn’t executives turn to PPM to get M&A insights as well?
With comprehensive data from across projects and products, the right PPM solution should give business leaders everything they need to spot gaps, opportunities, and risks as they bring new mergers or acquisitions up to speed.
But the key is finding a system that gives you the flexibility you need to interrogate the data from the portfolio level right down to individual projects. Only with this kind of flexibility can leaders identify irregularities across their portfolio, and then dig deeper to find and resolve the source of the problem.
It’s not easy getting this comprehensive, adaptable view of your entire enterprise. It takes the right solution, the right partner, and the right expertise to make the most of it. But it’s a vital step to extract the greatest value from your M&As – and ensure no obstacles are holding them back.
Don’t let your merger or acquisition be another part of the statistic
With so many M&A activities failing, you don’t want to leave yours up to chance. The right PPM can help you get the visibility you need to reduce risk and ensure new assets, people and skills are put to best use across the enterprise.
If you’re wondering what else the right PPM can do for your business, it’s time we had a chat. Our team have experience supporting, optimising, and de-risking M&A activities with comprehensive, flexible PPM solutions, and we’d be more than happy to show you how that experience can benefit your organisation.