Corporate executives are still willing to participate in mergers and acquisitions this year, despite economic uncertainty and growing shareholder backlash to deals. Almost 30% of the Fortune 1000 executives surveyed by Accenture, said their companies’ appetite for mergers and acquisitions would increase during the next six months. More than 50% of those surveyed said this appetite would remain the same as the year before. Only 18% said it would decrease in 2002.
As analysts and media companies continue to examine the effectiveness of combinations such as AOL/TimeWarner and Vivendi/Universal to report also isolates poor identification of synergies and benefits between merging businesses are the primary reasons for the failure of M&A deals.
“Companies talk about the strategic rationale behind a deal but in reality, testing those hypotheses quickly gives way to discussions about deal structure and getting the deal done,” said Justin Jenk, partner in Accenture’s Strategy practice. “In other words, they focus on financial due diligence and historic data instead of focusing on future trends and the sources of future revenues.”
Additionally, companies want to be diligent about both the strategy and execution of M&A deals, but not all companies can accomplish both. According to the survey, 11% of the executives surveyed said strategic integrity is the most important factor in accomplishing a successful merger or acquisition, while 20% said executional excellence is the key. Accenture’s survey suggests that both are equally important. “Our analysis of specific industries leads us to conclude that those who understand that an effective strategy is as important as execution stand a better chance of succeeding in a deal,” Jenk said. “True strategic due diligence requires companies to identify and test future value levers of deals prior to signing,” he said. “Acquirers should not only concentrate on past performance, but also be rigorous in their analysis of future sources of value for the combined companies.”