Whether a science or an art, ensuring the processes used in M&A benefit a purchaser, both during the deal and during the integration, remains an enigma.

There are many reasons for this: 

  • many opportunities get rejected, so when a deal does come along and the board has approved it the pressure to deliver, come what may,  takes over 
  • often before the deal is started the "commercial deal" is done so the deal team is seen as an 'execution only' team rather than a team who can challenge the rationale or adjust the terms 
  • even where the deal team has power to look at the rationale of the deal, it is only normally limited to setting escrows or specific indemnities rather than challenging whether the deal should take place  
  • a deal team rarely includes the CEO. Sometimes a CFO is included as well as the BD director, but they are in execution mode rather than "deal or no deal" mode
  • advisers, particular sellers, investment bankers have one role once exclusivity is granted - get the deal done come what may 
  • often what the sellers provide on due diligence and what the buyer wants are not aligned. The buyer is often not insistent enough to get the information it wants and are asked to take a view. Sellers' bankers, as mentioned above, put pressure on to get the deal done rather than provide the information 
  • the buyer management team often have day jobs to do so defer to advisers whose day job is to do deals. How often do the outside advisers really understand the scope required and are confident to challenge the business rationale
  • buyer advisers are often rewarded with fees linked to completion rather linked to an honest assessment as to the synergies or rationale as to the deal. Even when they speak out, they are seen to be taking a risk especially if the client disagrees. Advisers don't want to be seen as a negative against the positivity of the client deal team
  • external advisers are often specialists i.e. they do deals and move from deal to deal. They could even have several deals on at one time. Rarely if ever does a deal adviser act on integration so their knowledge is lost post deal 
  • deals need project management to bring all strands together. Good project managers are  a rare breed. It is even rarer that a buyer has a project manager internally who understands deal mechanics, so the job is outsourced. Project managers are often seen as down the food chain so don't get the respect needed and therefore what should be at the centre of any deal is pushed off the side lines
  • the people assigned to do integration are normally not on the deal team. Rather than using the deal team's knowledge they start afresh. They rarely understand the legal documentation of the deal so opportunities to use that documentation are missed
  • post deal, the seller /target management are not interviewed against the deal due diligence  to verify any assumptions made, nor are they encouraged to remedy any actions identified. The inefficiencies in the process get accentuated
  • data rooms are rarely downloaded to be used in integration. Instead they get shut and the information gets burnt onto a disc which then gets filed and not used again
  • to change the inefficiencies of the deal process requires a mindset buyers and sellers are not willing to adopt, but there is a real opportunity to revolutionise deal making and make the processes as strategic as the deal itself