Research has shown that 65% of acquisitions fail to deliver long term shareholder value. Remarkably, this level of failure has remained consistent over the last 20 years. It is not just the acquirers who are failing to deliver full value from a transaction – a seller will often lose value due to poor planning and packaging of the actual asset or business being sold.
Undertaking merger and acquisition (M&A) activity, whilst trying to create value, has become more complex. Across many sectors, the search for a successful M&A has become more attractive and competitive. Businesses are now seeking innovation through technologies and markets which bring a strategic advantage and profitable scale. In parallel, businesses are looking strategically at their portfolio of assets to determine where they should focus their capital and talent. This is resulting in an increase in non-core divestments to attract both private equity and corporate acquirers.
Recent disruptive trends and global events, including the COVID-19 pandemic, have disrupted well-established practices for businesses considering M&A. The key issues are supply chain security, access to stable markets and talent and regulatory environments. Many other traditional operating models are no longer suitable. Despite these challenges, M&A activity is a vital route to value creation when post-deal activities are properly laid-out, planned and, executed.
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