Why some M&A transactions create value beyond the deal

Few M&A transactions create value

Some M&A transactions deliver value beyond the deal and this do not happen by accident.For these buyers, acquisitions are an extension of their Corporate strategy instead of a sudden opportunity.
These acquirers are successful because they invest time and efforts in strategy and do not pursue an opportunity just because it is lucrative.
In order to extract maximum value from a deal, firms need to have a detailed value creation plan as part of their long term strategy.

M&A transactions should start with a clear M&A Strategy

  • The key factor for a strong M&A strategy is to identify areas where business needs to strengthen or expand in order to achieve its revenues objectives.
  • Once the areas are identified, then the acquirer needs to scan the market for the relevant opportunities.
  • Deals identified through a strategic portfolio review have a far higher chance to be successful in realizing value than opportunistic deals.

M&A transactions need to focus on Value Creation from Day 1

  • It is necessary to prioritize value creation from the time the deal is closed.
  • At the same time, value creation should priortise on those opportunities that offered greatest scope to add value and that can be quickly done.
  • Prioritizing on wrong activities can destroy value.Hence it is prudent to focus on activities that are aligned to the deal rationale.

M&A transactions need to have Comprehensive Due Diligence

  • A comprehensive due diligence is necessary to validate the pre-deal hypothesis and assess whether a potential acquisition will help them pursue their strategic priorities.
  • The due diligence should not focus on only Financial and Tax Due Diligence, but should be able to identify the value creation opportunities.

Readiness of the buyer in M&A transactions

  • The buyer needs to exhibit high readiness in the lead upto the transaction.Traditional 100 day planning is no longer enough and the acquirer needs to be ready atleast a month in advance.
  • The buyer needs to be ready with the Value creation plan which should have been validated during the Due Diligence and ready to be launched straight away.
  • The value creation plan should cover all aspects including Strategic repositioning, improving business performance, optimizing the balance sheet and having the right tax structure.

Allocate more resources to Integration in M&A transactions

  • Acquirers that commit resources to ensure the successful integration of a deal create significant value creation.These resources are dedicated purely for the integration efforts.
  • Integration requires more time and efforts.Studies indicate that acquirers who invest 15-20% of the deal value in Integration were successful in creating value.These acquirers work on integration and other core value creation levers during the due diligence. They have an Integration strategy ready at the time of signing.

Focus on People in M&A transactions

  • Cultures play a key role in the success of the deal.The deal makers should look at cultural compatibility between the buyer and seller before proceeding forward.
  • Successful acquirers identify key employees before acquisition and incentivize them to remain after the deal closure.
  • In tech deals, retaining talent is very critical because this is linked to the Intellectual property and other specific skills.The culture and other soft elements should be identified during the due diligence.A plan needs to ready to address any issues post deal closure.
  • As culture takes a long time to develop and effort to maintain, Communication becomes crucial to retain the core culture.Messages that reassure the target’s talent post the signing of the deal is critical to address any cultural issues.After the deal is closed, direct communication with the employees and motivating them to stay by giving them incentives becomes crucial.

Importance of Tax and Legal Diligence in M&A transactions

  • Tax and legal diligence is critical to the deal success and value creation.Acquirers need to have the right tax strategy and proper tax structures in place.
  • The deal gives acquirers a chance to revisit its tax policies and make any changes.Apart from focusing on commercial aspect of the deal, acquirers should also focus on the taxation aspects.
  • Addressing legal issues is also important for value creation.This includes examining the target corporate structure.The target may have chain of holding companies or have operations present in different parts of the globe.Post acquisition, the buyer may decide to close some of the target offices and divisions. There can be some legal blocks which can prevent the acquirer to move capital from one division to another.All these issues needs to be examined carefully so that the buyer can make gains.


  • Successful M&A transactions prioritize on value creation much earlier.
  • They have a clear M&A strategy, invest significant deal value in Integration and put people at the heart of the deal with clear Communication strategy.

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