A New Approach to M&A: Value-Driven M&A Integration
With Mergers and Acquisitions (M&A), the same integration approach has been used for decades. While some M&A has achieved its value, most don’t yield the desired results. It’s time for a change. This is where Value Driven Integration comes in. This new approach shifts M&A integration from being a ‘must do’ to a strategic initiative and transformational approach. Many Mergeflo customers are adopting this approach and building value-driven integration playbooks for various reasons:
The Benefits of Value-Driven Integration
Value Driven Integration focuses on two main areas of M&A integration — business-as-usual activities and key integration initiatives that create the highest return on investment (ROI). The former includes identifying processes that can be improved or optimized and cost synergies achieved through the transaction. The latter focuses on value drivers creating the largest ROI, such as increasing revenue streams, improving customer loyalty, creating new business models, or entering new markets.
The major benefit of this approach is that it shifts the focus away from simply executing synergies and onto creating actual shareholder value from the M&A transaction. It also places more emphasis on strategic planning rather than managing short-term goals, increasing the chances of long-term success. The approach also helps identify potential issues early on and address them before they become downstream risks. Finally, it creates an environment where all stakeholders are focused on achieving a common goal — maximizing shareholder value and ROI across all stages of M&A integration.
Starting Value-Driven Integration
Implementing Value Driven Integration requires a shift in mindset and approach to M&A integration by both executives and employees. The deal does not end upon the signing and closing of the transaction. Companies must invest time and resources into developing strategic plans with specific goals, timelines, and measurable milestones to ensure a successful outcome from their deals. They also need to create an environment where all stakeholders, from corporate development to functional integration team members, work towards a common goal and are held accountable for their contributions toward the metrics. Finally, key stakeholders should work together to identify potential risks early on to discuss any issues quickly before they become more significant problems. These steps build the foundation for successfully implementing Value Driven Integration within your company’s M&A strategy and ROI plans.
The approach also enforces tactical changes like reconfiguring the IMO (Integration Management Office), e.g., departing from IMO managing functional areas to IMO also managing value drivers as workstreams. It also reduces distractions around functional chores which do not protect, create, or capture value.
Typically value driver approaches work best during large transactions or transactions aimed at acquiring or transforming business models.
Concluding Thoughts
Value Driven Integration is an innovative way to achieve your M&A success through integration. It shifts our view of M&A being a strategic vehicle to a transformative initiative. The value-driven approach will require different integration processes, collaboration, and supporting infrastructure.
