The hard work starts when the deal is done

The deal has been done, the cash has been paid and the champagne has been downed – so what next?

By John Jones, partner and head of corporate finance, Beever and Struthers

Business acquisitions are frequently undertaken with an emphasis on getting the deal done. The integration issues that might arise afterwards are often ignored or misunderstood. Yet they are crucial to making the acquisition worthwhile.

Creating shareholder value through corporate acquisitions means negotiating a deal that includes a favourable price and favourable terms, but it also requires a successful integration programme.

Poor integration is repeatedly cited as one of the primary reasons that corporate acquisitions fail to meet the purchaser’s expectations. The first 100 days after acquisition is when most acquisitions fail, because an often overlooked step in the process is a strategic review to understand the difficulties that could arise post-acquisition because of differences in corporate cultures, business systems, remuneration packages etc that can all result in difficulty or failure, when integrating the acquirer and the target.

Overseas transactions are particularly tricky, not only because of potential cultural and language barriers, but also accounting & reporting issues. It is important that the acquirer considers the effect that foreign currency matters, multiple jurisdiction tax implications, multi-GAAP reporting and macro-economic risk can have on the business going forward.

Added to all this is the danger of the acquirer taking their eye off the ball and being distracted from running their own business in this critical period.

These considerations should be acted on smoothly post-acquisition to minimise operational risk and must be rooted in a solid plan based on targeted milestones on day 1, day 100 and beyond. So is it all worth it? A properly planned and executed acquisition can deliver increased market share and access to specialist equipment and skills more rapidly than organic growth, while also providing cost savings. But remember, the hard work starts as soon as the deal has been done.