Research announced today by Deloitte, the business advisory firm, has found a marked improvement in integration practices since the dot com bubble burst in 2001.

Angus Knowles-Cutler, Corporate Finance Partner at Deloitte and integration expert, commented: “Many acquisitions do not deliver the value anticipated.  In 2003, we found that a striking 60% of deals destroy value.  We have tracked the ‘health’ of 63 deals over the last ten years (with a total value in excess of £80 billion) before, during and after the merger and analysed their integration strategies as part of this process.  Our sample group has shown a marked leap in improved integration practices in the last year.”

Key improvements in M&A since 2001:

• Companies are now three times more likely to have put a cost reduction plan into place three months in advance of the merger
• They are twice as likely to have appointed a full time integration director to take responsibility for managing the process
• They are more likely to have developed a detailed communications programme for the staff in advance.

Knowles-Cutler went on to say: “In determining the driving forces for this change, we have found that it is a question of the stick rather than the carrot as the hurdle of returns becomes higher and higher.  Accordingly, this step change in improvement can be compared in parallel to the increase in premiums in the last year.  Both the corporate and private equity markets are faced with the same challenge: nothing concentrates the mind quite like the pressure to show promised financial benefits quickly.”

Jason Caulfield, Corporate Finance Director, added: “While the overall message of this research shows a positive change in the improvement of integration, we have found widely divergent practices.  Experience has a major part to play: we have found that the more mature sectors such as manufacturing and retail have refined their merger practices for the better, compared with the newer sectors such as media and telecommunications, which need to work much harder if they are to deliver returns.” 

Ends

Notes to editors

About the research
The Post Merger Integration team at Deloitte conduct ‘health checks’ on deals three months before completion, on day one post completion and then again three months later.  The team has conducted 63 health checks on predominantly blue chip companies and private equity deals over the last ten years, with a total deal value in excess of £80 billion.

About the Post Merger Integration team
The Post Merger Integration team at Deloitte is made up of thirty integration experts dedicated to advising on integrations and separations.  With over twenty years of experience, the team has worked on a huge number of high profile blue chip corporate and ‘big ticket’ private equity transactions.  Post merger integration advice is a huge growing area; the team itself has grown by 40% in the past twelve months.

Press releases for Deloitte & Touche LLP
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.