Where can boards play a bigger role in M&A deals?
There has been an explosion in the number of M&A deals, but as we know the success rate of M&A deals isn’t great with the often quoted 60% failing to increase shareholder value, leaving the Board to be criticised for not achieving a better deal. So how can Board members be on the front foot and ensure they are valuing the business, negotiating the best deal for all shareholders, managing risks and ensuring a smooth post merger integration?
There are four areas where Board’s can play a bigger role:
- Evaluating the potential value created by the deal and considering its fit in line with the company strategy
- Testing the valuation with industry norms
- Understanding what are the underlying assumptions made – what do projections assume about the target companies products and services
- Considering how dependent is the deal’s success on the people, customers, vendors/suppliers of the target company
- Understanding the target’s key risks, including financial, ESG, DE&I, operational and market risks
- Understanding possible cultural issues – how behavioral norms and values will need to converge
Post-merger integration planning and execution
- Ensuring the post-merger integration plan is in place and is detailed and robust
- Adjusting the plan during the due diligence process as risks, issues and opportunities are identified
- Monitoring to ensure flawless execution and drive out of the growth and cost synergies
- Test the deals fit with long term strategic goals
- Closely monitor key risks, cultural issues and capacity and capability to execute
- Determine whether there is a well thought out plan for each stage of the deal
- Ensure the synergies are delivered (growth and cost) during the integration
- Board composition is crucial in enhancing effectiveness and value add in the M&A process
Based in London and with over 24 years’ global experience, Karen Thomas-Bland is often cited as one of the top business transformation consultants and coaches in the world. She is a trusted advisor to boards, executive teams and investors, creating sustainable, long-term value for FTSE/Fortune businesses and PE funds. She writes for many publications including The Times, FT, Association of MBAs and Management Today.