M&A integration: Who’s running the show?

September 19, 2017


By Gregg Nahass and Lawrena Colombo, Partners, PwC Deals

One of the most striking results of PwC’s 2017 M&A Integration survey is the steep rise in the number of companies tying executive compensation to deal success. Senior management and even board members are increasingly being held accountable for delivering deal value. Perhaps this isn’t surprising. When companies expect nothing less than transformation from their deals, it makes sense to provide incentives for leaders to get results.

A remarkable 63% of survey respondents said their organizations link total CEO compensation to achieving M&A goals, up from just 28% in 2010. The increase in board member incentives was equally dramatic, with 34% of respondent companies tying board member compensation to deal success vs. just 5% in 2010. More companies are also linking CFO and CIO pay to achievement of M&A objectives. And as PwC’s 2016 CEO Survey showed, leading companies bring a chief integration officer into the executive suite to help manage the process.

That focus on integration seems to be paying off. According to our survey, more companies are seeing positive financial results from their deals in terms of profitability and cash flow. Almost twice as many respondents than in 2013 reported favorable or very favorable results in capturing cost and revenue synergies.

While the board and C-suite may have more skin in the game, this doesn’t always translate into coordinated leadership during M&A integration. Surprisingly few respondents have full-time executive sponsors or dedicated functional personnel to choreograph activities. This may go a long way toward explaining why so many transactions fall short strategically. While our research shows more companies are realizing significant operational and financial success from their deals, only 55% say the same for strategic success, down an alarming 10 percentage points in three years.

Our experience shows that a well-designed Integration Management Office helps integration stay on course and focus on the right activities at the right times. The survey results bear this out; companies whose deals had the highest rates of operational, financial and strategic success—the high performers—were considerably more likely to have an executive sponsor and teams dedicated full-time to integration.

Dedicated leaders, committed over the long term, can focus on deal objectives and synergies. Furthermore, when a transformational transaction combines two entities with different cultures and capabilities, executive leadership must understand and communicate how the target company should be integrated—or perhaps not integrated—to protect and harness those capabilities. We spoke with a few executives to get their thoughts on the importance of leadership and accountability in the integration process. Hear what they had to say in our new video.

You can also read our full 2017 M&A Integration Survey Report, which explores the evolving challenges for dealmakers and offers our insights to assist you in making decisions when choreographing your company’s next big performance.

 


Contacts

Bob Saada

US Deals Leader Tel: +1 (646) 471-7219 Email: bob.d.saada@pwc.com

Neil Dhar

Tel: +1 (646) 471-3700 Email: neil.dhar@pwc.com