3 questions to smart minds

Successfully implement M & A projects

For this 3 questions to K. Lucks

MMI Merger Manage­ment Institute
Photo: K. Lucks | MMI
30. April 2013

Mergers and Acqui­si­ti­ons (M&A) is a diffi­cult process. — What are the capa­city, skills, and time requi­re­ments for indi­vi­dual subpro­jects? Where are the inter­faces between the proces­ses? Where do criti­cal paths open up? What are the bench­marks, and what are the best prac­ti­ces, that buyers and sellers of compa­nies, or even M&A advi­sors, can use as a guide? 

For this 3 ques­ti­ons to Chair­man, Bundes­ver­band Mergers & Acqui­si­ti­ons; Mana­ging Direc­tor, MMI Merger Manage­ment Insti­tut GmbH; Editor of the newly published book “M&A‑Projekte erfolg­reich führen” (Successfully Mana­ging M&A Projects)

1. Given the current econo­mic situa­tion in Europe/Germany, what types of M&A tran­sac­tions can we expect?

In the medium term, ever­yone is waiting for the “7th M&A wave”. Curr­ently, there is an M&A traf­fic jam. Over­all, “cross-border M&As” are growing in importance. Estab­lished stra­te­gic inves­tors domi­nate the market compared to private equity. The U.S. is gearing up for increased acqui­si­ti­ons into Europe and emer­ging regi­ons. For their part, emer­ging markets are more frequently attack­ing targets in Europe, taking an incre­asingly stra­te­gic approach in order to achieve leading global market posi­ti­ons. Germany is thus once again giving away entire indus­tries, such as the solar sector. We have to keep up with the ongo­ing global conso­li­da­tion, other­wise we will lose touch.

2. What approach do you recom­mend to mid-sized entre­pre­neurs who don’t main­tain entire staffs for M&A, as some large corpo­ra­tes do?

M&A requi­res diffe­rent compe­ten­cies than conti­nuity manage­ment of the incum­bent busi­ness. And addi­tio­nal capa­city is requi­red, espe­ci­ally in the imple­men­ta­tion phase after closing. To that extent, it’s about the ways in which compe­ten­cies and capa­ci­ties are built up or procu­red extern­ally. Expe­ri­ence shows that exter­nal lawy­ers, audi­tors and tax advi­sors are used in suffi­ci­ent numbers during the tran­sac­tion phase. The tran­sac­tion also usually runs successfully. Criti­cal is the preli­mi­nary phase with stra­tegy deve­lo­p­ment and espe­ci­ally the imple­men­ta­tion phase after closing.

Small and medium-sized compa­nies often make the mistake of not having a suffi­ci­ently robust stra­tegy and plan­ning for the M&A project. Here we need to invest more in stra­tegy work. The imple­men­ta­tion phase must be plan­ned at an early stage. If there are not enough compe­tent people on board, then exter­nal consul­tants should be brought in. For the imple­men­ta­tion phase of a “normal” acqui­si­tion (medium posi­tive indus­try return), 5% of the purchase price should be calcu­la­ted in costs for inter­nal or exter­nal consultants.

3. Which manage­ment proces­ses should receive the most atten­tion in an M&A transaction?

The concept of thin­king in terms of end-to-end proces­ses alone is a major advan­tage over a clas­sic “relay race” , i.e. passing the project from one specia­list to another without end-to-end respon­si­bi­lity. We are deal­ing with three core proces­ses in M&A that should be actively invol­ved from start to finish: (1) the stra­tegy deve­lo­p­ment and plan­ning process with main focus at the begin­ning of the project , (2) the deal­ma­king process with main focus in the tran­sac­tion phase and the (3) imple­men­ta­tion process with main focus in the execu­tion phase. Howe­ver, M&A is beco­ming incre­asingly complex. This is often rela­ted to the incre­asingly distant and cross-border regi­ons in which M&A takes place. With ever more compli­ca­ted tran­sac­tion models as well as ever higher legal requi­re­ments, for exam­ple compli­ance. In our book “Leading M&A Projects Successfully”, all areas and proces­ses are juxta­po­sed for the first time. The table of contents can alre­ady be used like a check­list for the to-do’s. Because of the highly conden­sed contri­bu­ti­ons, the book is desi­gned as a guide espe­ci­ally for executives.

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