April 11, 2018
By Gregg Nahass, US and Global M&A Integration Leader, PwC Deals
Changing the way you do business is hard, and companies are turning to deals as a way to bring about that strategic change. Activity within each sector tells only part of the story, as deals between different industries continue to bloom. From tech companies being acquired by buyers in non-tech industries to retailers buying local delivery businesses, there are plenty of cases where companies are transforming their core business.
Companies are doing more and more transformational deals, using M&A to expand into new markets, products and channels, and to gain access to new managerial and technical talent. More than half of the executives who took our M&A Integration survey described the largest transaction they completed in the last three years as transformational, up significantly from 2013 and 2010.
Integrating a business with capabilities outside the acquirer’s core is clearly harder than combining like with like. The days of simply tucking a complementary capability into existing operations are quickly fading. As our survey shows, many companies struggle to meet their transactions’ go-to-market goals: growing market share, accessing new markets, accessing new brands, technologies or products, and accessing new distribution channels.
Go-to-market objectives have become more important over the last few years. For example, 78% of survey respondents said growing market share was a very important deal goal, compared with 62% in 2013. Yet far fewer respondents are reaching those goals. Just 15% reported complete success in achieving growth in market share, down from 45% three years ago. Other related objectives experienced similar dynamics, including access to new markets, access to new brands, products or technologies, and access to new distribution channels (see chart below).
Transformational deals also make people integration more difficult because the acquirer may be assimilating a different organizational structure with different kinds of employees. As companies reach into unknown territory for growth, strategic success requires leaders to coordinate deal integration across functions and geographies, taking a direct role in – and accountability for – its implementation.
M&A success today looks different from the way it looked three, five or even 20 years ago. Companies expect their deals to not just save them money or boost their competitiveness, but to transform them. That often means taking the time to learn about how these transactions will affect each dimension of the enterprise.
To learn more about the rise of transformational deals and the impacts to the integration process, please read the full report, M&A Integration: Choreographing Great Performance. It explores the evolving challenges for dealmakers and offers insights to assist you in making decisions when planning your company’s next big move. Also, check out this video which features several executives discussing their experiences with transformational deals.