PwC's 2014 M&A Integration Survey Report Shows That Sustained Commitment to Integration Over the Long Term is Critical to Delivering Full Deal Value Only half of executives polled were committed to integration completion over the long term
NEW YORK, March 12, 2014 /PRNewswire/ -- Today's deals are more complex, broader in geographic scope and far more likely to go off course than ever before, requiring a sharp focus and long term commitment to the integration process to capture the full value of the deal. The integration process becomes increasingly complicated as companies enter into bigger, transformational1 deals and do deals outside their core competencies. Despite growing inherent risks in doing deals in today's environment, PwC's 2014 M&A Integration Survey report released today by PwC US found that only 50 percent of respondents reported being committed to integration completion over the long term.
"Today's integration process has become increasingly complex as companies are doing more transformational deals to enter into new markets, channels, products or operations," said Gregg Nahass, PwC's U.S. and Global M&A Integration leader. "To capture the full value of the deal, companies need to have a long-term commitment to realizing their strategic, financial and operational goals."
According to PwC's survey, integration issues continue to challenge deal success and a recent shift in deal-type from absorption2 deals to transformational deals has further increased the complexity of integration. When polled on their level of experience with each acquisition type, 50 percent of respondents reported having a core competence in absorption deals compared to only 24 percent in transformational deals, indicating a significant gap between the increasing number of transformational deals being initiated and the much-needed track record and experience level in integrating these deals.
PwC's report outlines three key success factors for establishing integration momentum and delivering deal value:
- Early Integration Planning – Integration efforts can take years to fully complete and PwC's survey results suggest a higher probability of achieving deal goals when planning starts early. Underscoring this importance, the highest performing deals (those where respondents reported the highest level of success in all three areas of performance – strategic, financial and operational) were characterized as having 92 percent of their integration teams starting work either before or during due diligence.
- Speed of Integration – PwC's survey respondents indicated that performing integration at a faster pace than their company's normal operations led to greater success with achieving strategic, financial and operational goals on their deals. Of those surveyed, 48 percent of respondents for the highest performing deals said their company moved at a faster than normal pace for integration.
- Sustained Commitment to Integration – For many years respondents have reported poor results in realizing their operational goals, which can be the toughest to realize as they can only be achieved through a sustained commitment to integration completion over the long-term. Of those polled by PwC, 68 percent of the highest performing deals indicated their companies were completely committed over the long-term, demonstrating that results improve with greater commitment. In addition, only 42 percent of survey respondents reported being completely committed to realizing synergies over the long-term with even lower results for people integration (39 percent) and IT integration (33 percent).
"Successful integration needs to happen quickly and systematically as the period of time between deal announcement and deal close and the initial period post-close are critical to realizing quick wins and setting the course to deliver deal value over the long-term," Nahass continued.
Consistent with previous years, respondents in PwC's most recent report noted that once the deal closes, strategic and financial goals are easier to achieve than operational targets. In 2013, 65 percent of respondents characterized recent deals as a significant success from a strategic standpoint, while 49 percent reported significant success in achieving financial goals, and only 35 percent in realizing operational goals.
PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals
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1 Transformational deals involve acquiring new markets, channels, products, or operations in a way that is transformative to the fully integrated organization.
2 Absorption deals involve acquiring and integrating similar companies as their own, such as industry competitors. This is sometimes called consolidation.
SOURCE PwC US