Mergers and Acquisitions Operational Synergies
Perspectives on the winning approach
Why are mergers so often unable to achieve their desired results? While integration is not conceptually difficult, our experience indicates that it requires careful planning followed by an extremely meticulous focus on execution when confronted by the enormity of the effort.
Facing skepticism and intense pressure to perform, managers overseeing the execution of these transactions tend to focus on quick wins. While supply chain efficiencies and operational improvements have a direct impact on the revenue, cost, capital expenditure, and working capital synergies that result from a merger, our experience indicates there are several missed opportunities in all phases of the merger process, from pre-deal planning through post-integration.
What are the three principle reasons why companies fail to achieve M&A synergies?
Our research indicates three principal reasons why companies fail to achieve mergers and acquisitions (M&A) operational, supply chain, and manufacturing operations synergies.
- Planning: First, companies focus on capturing short-term financial synergies rather than taking a holistic view. By reducing the scope, they often overlook many “hidden” synergies and fail to create high performing supply chains with significant long-term upside that provide sustained value for customers and stakeholders.
- Preparation: Second, during M&A due diligence, companies overlook the overall business and operational “compatibility” of the two companies. Operational synergies are not synchronized with the customer/market needs of the combined entities, often requiring supply chain “rework” or savings “erosion.”
- Execution: Finally, companies drastically underestimate the complexity, resources, communication, and management focus needed to execute a successful integration and realize expected synergies.
We explore each of these three key themes in Part I of this miniseries. For more details, please download additional articles of our miniseries - Mergers and Acquisitions Operational Synergies.