story.

There is a lovely apparent contradiction between the headlines in business journals and management consultancies that “most mergers fail” and the annual increase in M&A transactions.

The reality is that these are not mergers, and they are not failing. We need to segment different types of deal, they are not one homogenous group that should be analyzed as a whole. We need to factor in reactions of decision makers to their personal incentives. We need to accept that people are not economically rational decision makers. We need to look behind public statements from the organizations involved and look at the reality of their business models. We need to understand that in the field of M&A, there is a panorama of motivations.

Not Post. Rarely Merger. Not always Integration.

Not Post.

Value creation from M&A doesn’t start post-deal.

Rarely Merger.

Most deals are better described of as acquisitions, not mergers.

Integration is not always the goal. Value creation comes from how the two combined teams work together, not harmonisation, standardisation and assimilation.

Not always Integration.

The language we use to describe things helps shape our understanding. The term Post Merger Integration conveys a misunderstanding of the value, challenge and opportunity. We need a new term... 'Value Creation through M&A'.

  • In traditional M&A integration thinking, you focus on operational changes to achieve the cost synergies. These are often planned by accountants looking at data with limited access to management. While consultants are adept at restructuring and have a good track record of delivering internal efficiencies, they typically lack industry sector knowledge. They rarely have the skills or experience required to drive branding, marketing and revenue growth. As a result, integration strategies become inward-looking, missing the critical elements of market positioning, product packaging, pricing and revenue growth.

    No organization can afford to be internally focused and take their eye off their customers for a year or two to deliver an integration. Integrations that don’t incorporate a strong customer focus risk damaging your market position. Instead, organisations need continuous customer engagement and alignment of sales and marketing strategies.

  • Studies from Cornell and Bain & Co highlight the benefits of accumulated acquisition experience. Frequent acquirers, those who consistently hone their integration capabilities, achieve far greater returns than those who acquire infrequently.

    These studies reveal a “U-shaped” learning curve: after an early success, subsequent attempts stumble as acquirers generalize early lessons inappropriately, then performance improves significantly with deeper experience.

    These winners are not adding more detail to a rigid approach for every deal, they are learning to adapt to the situation at hand. M&A integration is a journey that demands flexibility and pragmatism.

    Effective integration requires more than simple delivery of cost synergies; it is about a contingent, adaptive approach that respects the unique circumstances of each deal. Delivering value in M&A is contingent on the specific goals of the deal and the capabilities of the organizations involved. And it is about more than what appears in a P&L. A P&L will not highlight that the costs you are cutting are the capacity or capabilities you need for growth. Nor will it reveal the emerging culture in the new organization, the daily small positive or negative behaviors which will shape the organization’s future.

  • Our collective understands communication, cultural alignment, and stakeholder engagement at all levels of the company. In this journey we cannot view leaders or employees in the organization as purely rational actors. Thanks to the pioneering work of Daniel Kahneman, we understand better now that behaviors, culture, and adaptability are as important as strategic choices.

“I believe that one of the greatest mistakes made by human beings is to want certainties when trying to understand something. The search for knowledge is not nourished by certainty: it is nourished by a radical absence of certainty. Thanks to the acute awareness of our ignorance, we are open to doubt and can continue to learn and to learn better. This has always been the strength of scientific thinking—thinking born of curiosity, revolt, change. There is no cardinal or final fixed point, philosophical or methodological, with which to anchor the adventure of knowledge.”

Carlo Rovelli, “Helgoland”