How to Maximize Value in Complex M&A
In complex M&A, maximizing value takes extra skill and focus
Realizing value from M&A takes meticulous preparation and relentless focus on delivering against goals. In complex transactions, leadership, communication, and persistence can be the difference between value creation and missed opportunities.
Unfortunately, buyers aren’t always connecting the dots to achieve their value goals.
The Rising Complexity of M&A
It's not your imagination. M&A is undeniably getting harder. Recent economic conditions have added degrees of difficulty, making meticulous planning and execution essential for success.
In 2024, KPMG surveyed 100 corporate executives of US-based companies that had participated in a complex M&A deal of $1 billion or more.
- Significant Synergy Gaps: 100 percent of survey respondents reported a significant gap between their revenue synergy assumptions and actual synergies, which ended up at less than 50 percent of targets.
- Strategic Alignment Oversight: Only 35 percent of leaders emphasized the importance of discussing the strategic alignment and long-term vision for complex M&A with internal stakeholders.
- Learning from Past Deals: Just 32 percent of respondents said they revise their M&A playbook based on lessons learned from previous deals.
Complex Deals, Big Wins: The Value Proposition
The payoff for navigating the intricacies of M&A can be substantial. KPMG research indicates a significant return advantage for those mastering complex deals. Specifically, based on the sample of deals, there was a 40-percentage-point difference in the three-year post-deal return for white space acquisitions worth $1 billion or more, compared to simpler deals.
Defining and Measuring Value in Complex Deals
Finding and ensuring value in complex M&A requires a multi-dimensional approach that reflects the strategic, financial, and operational priorities of the organization. Defining value comprehensively and stress-testing assumptions for delivering that value can better position acquirers to realize the full potential of complex M&A.
1 | Strategic value:
This includes the pursuit of bold, long-term ambitions yielding competitive advantage, market positioning, and product expansion.
2 | Financial value
Perhaps the easiest to measure but hardest to model, revenue growth, cost optimization, and improved cash flow are front and center in any complex deal..
3 | Operational value
Significant improvements in process efficiency, resource optimization, and product/service quality ultimately flow to the bottom line but they also can contribute significant value independently in a deal. Sometimes overlooked, retaining key talent is one way to preserve deal value.
Navigating A Tougher Road Ahead
Complex deals can yield significant top and bottom-line benefits, but these deals are harder to pull off. Complex deals take longer to close than non-complex ones, our analysis shows. And the higher interest rates and cost of capital of 2024-2025 are pressuring acquirers to realize value more quickly.
Execution Risk in Complex M&A
Complex deals often require a significant change in a company’s growth trajectory and a shift in mindset from simply buying to building and delivering synergies. All this means there is more at stake and the execution risk is high.
How can acquirers gain an edge to help them preserve and create value as the degree of difficulty in their M&A transactions rises? The following four actions provide a strategic framework:
Four Key Actions to Maximize Value in Complex M&A
Value creation starts with a clearly communicated strategy, supported by systematic business reviews.
Everyone from HR to IT needs to pressure-test deal assumptions and participate in due diligence to ensure alignment on the deal’s goals and outcomes. Securing buy-in to key deal value propositions, including revenue synergies, will foster heightened accountability.
A strong M&A-friendly culture, effective change management practices, and diverse talent improves a company’s ability to meet deal objectives. Retaining key talent and placing the right leaders in roles critical for value realization is essential.
Changing your company through M&A might feel like a marathon of sprints. Dedicated resources for iterative learning and maintaining an ongoing leadership focus to build long-term M&A capabilities will improve deal outcomes.
Strengthen your deal fundamentals to achieve M&A success in partnership with KPMG
Today’s M&A environment is increasingly defined by intense competition, high valuations, and rising complexity. The stakes are higher than ever. Whether plotting the best path to a winning bid, identifying and protecting value, or managing risks, KPMG deal advisors offer:
- Industry and Functional Expertise: Our team harnesses deep industry and functional experience to help reduce uncertainty, help clients make better decisions, and achieve faster outcomes.
- Expanded Insights: With an integrated approach, we help clients identify and realize extraordinary synergies required by today’s complex deals.
- Advanced Analytics: Our use of advanced analytics generates distinct insights into companies and markets to support smooth deal execution, drive value realization, and minimize risks.
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Navigating the complexities of today’s M&A landscape requires a new playbook. With our strategic insights and deep expertise, C-level executives can confidently tackle high-stakes deals, achieving both immediate success and long-term value. Contact us today to explore how we can support your next M&A endeavor.
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