Axel Seemann is a vice president in the Frankfurt office. He joined Bain in 1993. Over the last years, Seemann has worked for clients in various industries, from healthcare and media to industrial equipment and consumer goods.
M&A viewpoint
M&A has a pronounced opportunity-risk profile–realistic synergy assessment and careful integration planning during due diligence mitigates the risk.
- Mergers and acquisitions can deliver great value if well conceived and properly executed. However, they are inherently risky. While executives are getting better at deal making, acquisition success is modest overall: still about half the deals larger than $250 million fail to deliver promised returns.
- The problem often lies in the middle of the deal value chain: commercial due diligence. Only one in three executives we surveyed said they are satisfied with the rigor of their deal diligence; overestimated synergies and ignored integration challenges are the two major pitfalls.
- Beware the allure of expected synergies: use the due diligence process to distinguish between the different kinds of synergies available. Then estimate the potential value, the probability and the speed with which they can realistically be achieved. Make sure you account for the investments it will take to get them.
- The nature and extent of synergies will depend on the deal's strategic rationale, considering if you are pursuing a scale or scope acquisition. Extracting value from combining complementary businesses is more elusive than most people think, both in terms of the actual potential and the work required to achieve it.
- Also, assess how potential conflicts between the merged businesses may sap revenues or add costs.
- Don't put off thinking about the sensitive issues inherent in integration planning until after the deal is signed and sealed, which is often a serious mistake: the first day of due diligence is really the start of merger integration. It is the opportunity to chart a course early to unlock integration value quickly but also to anticipate potential integration challenges upfront to avoid unpleasant surprises. Again, the type of deal makes a big difference and will guide the subsequent integration.
