Page

Pages

Die M&amp;A REVIEW wurde 1990 von Prof. Dr. Günter Müller-Stewens ins Leben gerufen und von 1992 bis 2016 vom Institut für Betriebswirtschaft (IfB) an der Universität St. Gallen betreut. Heute sind Prof. Dr. Florian Bauer und Prof. Dr. Christoph Schalast die Herausgeber. Das Magazin liefert monatlich Fachbeiträge zu Unternehmensübernahmen und Fusionen im deutschsprachigen Raum und international. Sie bietet einen Überblick über aktuelle M&amp;A-Trends, erfolgte Transaktionen und beteiligte Interessengruppen wie Käufer, Verkäufer, Berater und Intermediäre. Die Themen umfassen praxisrelevante Fragestellungen entlang des gesamten M&amp;A-Prozesses, Analysen von Verflechtungsstrukturen einzelner Konzerne und Branchen, statistische Auswertungen, Länderanalysen sowie juristische und steuerrechtliche Beiträge.

Die M&amp;A REVIEW richtet sich vornehmlich an M&amp;A-Professionals im deutschsprachigen Raum. Dazu gehören zunächst Führungskräfte in Strategie- und M&amp;A-Abteilungen von Unternehmen sowie deren Unternehmensleitungs- und Kontrollebene. Daneben zählen Unternehmensberater, Vertreter von Investmentbanken und Corporate Finance-Boutiquen sowie Partner und Mitarbeiter von Wirtschaftsprüfungs-/Steuerberatungs- sowie Rechtsanwaltssozietäten, die im Bereich der Unternehmensübernahmen und Fusionen tätig sind, zum Leserkreis. Auch Finanzinvestoren beziehen regelmäßig die M&amp;A REVIEW. Aufgrund der wissenschaftlichen Fundierung und des universitären Hintergrunds ist die Fachzeitschrift auch in vielen Universitäten und Forschungseinrichtungen verfügbar.

<ul><li>Mit über 30 Jahren führende Fachzeitschrift rund um M&amp;A seit 1990 (deutschsprachig)</li><li>Seit 1.1.2015 offizielles Publikationsorgan des Bundesverbands Mergers &amp; Acquisitions e.V.</li><li>10 Ausgaben im Jahr mit Doppelausgaben im Januar/Februar und Juli/August</li><li>Print-Auflage bei ca. 1.000 Exemplaren pro Ausgabe</li><li>kostenloser M&amp;A REVIEW Online-Zugriff auf Archiv (nur für Abonnenten – hauptsächlich deutschsprachig)</li><li>Seit Juni 2020 Zusammenarbeit mit dem französischen Fachmagazin Fusions &amp; Acquisitions, seit 2023 gemeinsamer Auftritt mit englisch-sprachigen Fachmagazin Combuyn</li></ul>

Main content assets

Main Content Assets

ausgabenuebersicht-teaser.png

Publikation

Leo Berthier

leo.berthier@manda.co

Ausgabenübersicht

Sonderausgaben

Jahresindizes

Autorinnen und Autoren

Dossiers

Podcasts

Partner

Kontakt

MANDACO

NEWSROOM

M&A REVIEW

LEBENSWERK

COMBUYN

Login

Profil

Logout

M&A Advisor

M&A Tool Provider

Corporate

University Member

PE, Family Office

Student

Others...

mandaco

M&A Review

Combuyn

Lebenswerk

Strategien & Visionen

Dr. Kira Zerwer is a Consultant at Boston Consulting Group in Vienna and part of the post-merger integration taskforce. She has a PhD in Finance and more than 5 years of post-merger integration experience in the DACH area and beyond.

Dr. Kira Zerwer

Dr. Matthias Krühler is a Managing Director and Partner at the Boston Consulting Group in Hamburg. He leads Boston Consulting Group’s post-merger integration work in Central Europe and is the Central Europe Head for BCG’s Energy practice. He has more than 15 years of consulting experience, leading some of the landmark post- merger integration in the DACH area and beyond across various sectors. kruehler.matthias@bcg.com

Dr. Matthias Krühler

Leif Neumann is a Partner and Associate Director at Boston Consulting Group in Hamburg and specializes in post-merger integration. He has more than 15 years of consulting experience and has been part of numerous transaction teams in the DACH area, the Nordics and beyond.

Leif Neumann

<h3>1. Introduction</h3>Despite current headwinds, European M&amp;A activity continues to remain consistent with pre-pandemic levels.1 Nevertheless, the deep pockets of the past are gradually depleting as corporations grapple with increasing inflation and the challenges of securing financing. This is just one indication of the broader economic conditions, which are as challenging as those experienced during the 2007/2008 financial crisis.2In light of the economic environment, corporations face two types of challenges when pursuing their next deal. Firstly, there is a growing need to identify the most attractive deals in terms of valuation. While in recent years, companies were willing to pay a premium for targets, the era of overspending on M&amp;A deals has come to an end, primarily because achieving satisfactory returns on investment in the current climate has become more challenging. This underscores the importance of meticulous due diligence to thoroughly assess all potential costs associated with the target, including the expenses and effort required for integration. Secondly, due to the tougher economic conditions which make it harder to achieve above-average returns, the pressure to maximize the benefits of a deal post-acquisition has intensified.3 The importance of executing a successful integration cannot be overstated. Therefore, we must address the following questions: Are we factoring integration efforts as a cost (or benefit) into our target pricing? And should we reconsider our approach to integration in order to capture more value?Based on a quantitative survey of German-speaking (investment) professionals across thirteen industries in the DACH area, we show that most corporations do not factor in benefits or challenges of the integration to come when buying a target via paying a premium or discount target price. They are rather willing to spend additional (corporate) resources ad-hoc during the integration process to still be able to capture the full value of the integration. Pockets seem to be not empty to generate the most value out of M&amp;A activities, but rather closed until later in the integration process.<h3>2. Value drivers in post-merger integration</h3>To address the question of effectively pricing in and enhancing value during the post-merger integration process, we would first like to succinctly introduce the key value drivers we have identified through our post-merger integration project experience. While post-merger integrations are inherently complex and each deal possesses its unique characteristics, we have consistently observed four dimensions that are prevalent in virtually all transactions, albeit with differing degrees of manifestation. Each of these drivers comes with certain benefits and cost throughout the post-merger integration process, depending on the individual situation of the target, that can make a significant difference in the overall value generated by the transaction and ideally should be considered in both phases – the target acquisition and purchase price negotiations as well as the integration efforts itself.<h4>2.1 Cost synergies</h4>Cost synergies, though sometimes met with skepticism, play a crucial role in creating sustainable value in post-merger integration scenarios.4 These synergies extend beyond mere cost reduction. They involve strategically eliminating redundancies, leveraging economies of scale and increased purchasing power, and spreading best practices to enhance process efficiency and operational effectiveness across the merged corporation. Additionally, these synergies often manifest in less obvious ways, such as through more efficient research and development, innovation activities, and better asset utilization5. Despite being a key driver of value, realizing these synergies can be challenging, particularly when entangled in complex legal or political frameworks, such as entrenched leadership interests or rigid labor laws. Furthermore, the integration of processes and systems, especially in the era of increasingly complex technology, can demand substantial time and effort before the merged entity sees the full extent of these benefits. Therefore, while the potential advantages of cost synergies are often identifiable even before acquiring a target, they also come with inherent costs that must be carefully weighed.<h4>2.2 Revenue synergies</h4>Revenue synergies pertain to the augmentation of sales figures resulting from the amalgamation of operational activities between the acquiring entity and the entity being acquired and are pivotal in propelling the merged entities’ long-term growth. These synergies stem from a variety of strategies, such as leveraging cross-selling opportunities, enriching the product and service offerings, and strengthening customer and distributor networks6. Additionally, less apparent yet significant value drivers include brand enhancement, access to new technologies and increased innovation capabilities7, and fostering improved customer loyalty. While the long-term advantages of revenue synergies are evident, realizing these benefits necessitates larger efforts. These efforts include, for instance, reconfiguring internal incentive systems across different business units and adjusting responsibilities and resource allocation to incentivize cross-selling within the organization. Furthermore, challenges like branding issues and customer retention measures represent potential costs associated with this approach to value creation. These factors must be carefully considered when evaluating the potential value of a merger target.<h4>2.3 Organizational design</h4>The efficacy of the merged entity hinges on a strategically formulated operating model. This organizational skeleton is pivotal in actualizing synergies, streamlining operations, and cultivating a cohesive and competitive organization. It underpins the organizational culture and ways of working, catalyzes innovation, and intensifies (if needed) customer-centric approaches – an indirect way of generating value during post-merger integration. However, the challenge here during post-merger integration often is to balance speed with diligence and conquering of the complexity to reap all benefits and avoid unnecessary costs. On one hand, there is the need for swift action to maintain momentum, reassure stakeholders, and achieve early wins that can drive the integration forward. On the other hand, a deep-dive analysis into the cultural, operational, and strategic nuances of each entity is crucial to preserve value, mitigate risks, and align the integration with long-term strategic objectives. Especially employee uncertainty and top-talent retention require additional attention and care during a post-merger integration and can be an unwanted cost during the integration process if not considered carefully enough. Also, an already complex organizational structure that needs to be fully readjusted can be a significant cost during the post-merger integration process in terms of required resources and time.8<h4>2.4 Culture and change</h4>Often regarded as the more intangible aspect of post-merger integration value creation, cultural integration is, nonetheless, a critical determinant of successful mergers9. Cultural integration encompasses various dimensions, including values, beliefs, working styles, and communication patterns. It requires a deep understand--ing of the intrinsic motivational drivers and behavioral norms of each merging entity. Effective management of cultural amalgamation is essential for talent retention, operational stability, and the fulfillment of the merger’s strategic imperatives. While not being a direct value driver of a post-merger integration comparable to hard-fact synergies, culture and change efforts have a significant effect on the efficiency of a merged entity and lead to successful outcomes during and after the integration.10 Thus, while value out of a well-executed cultural integration becomes obvious long-term, short-term, it often means more costs than actual benefit if a significant cultural gap exists as larger efforts might be needed to close the gap.<h3>3. Methodology</h3>To answer the two above questions of how the way a firm can be integrated changes the a) target price and b) the (resource) focus of the post-merger integration program, we conducted a quantitative survey. We instructed survey participants to visualize themselves acquiring an entirely hypothetical target company operating in the automotive supplier market. In a first step, we asked for their inclination to pursue acquisitions in four scenarios: 1) private equity owned supplier with high cross-selling potential, 2) family-owned supplier with cost-cutting potential, 3) carve-out with lean org structure, and 4) start-up with dynamic and young culture. In a second step, we asked how important they find our four post-merger integration value drivers (cost synergies, revenue synergies, organizational design, culture and change) and how much they would be willing to pay for each of the factors (discount, neutral, premium) depending on the company they choose to buy. In a third step, we asked survey participants to imagine a situation that requires additional attention on one of the four post-merger integration factors and their willingness to in invest in additional (corporate) resources to resolve the situation.Participants in the survey hail from thirteen diverse industries, with half employed in service or finance as investment professionals, and the remaining half in strategy or merger &amp; acquisitions departments across various sectors. A significant 80% of these participants hold positions at the first or second management level, regularly encountering decisions regarding acquisitions. Notably, over 25% of the respondents boast more than ten years of experience in their current roles, and 45% have at least five years of experience. This composition of the survey sample ensures a wide range of data variation and guarantees that the participants possess the relevant experience to effectively engage with the survey questions. All survey participants were selected and contacted by the authors to ensure a high quality of survey results.<h3>4. Discussion</h3>Our results show that investment professionals do not price in benefits or challenges of the integration to come when buying a target via paying a premium or discount target price. While acknowledging the importance of taking the different factors into account in the stage of purchase price negotiations, the considerations stop once money needs to follow words. In our sample, we find statistically significant evidence that investment professionals have an increased willingness to buy a firm if it provides top-line growth opportunities or has a great existing organizational structure. There is no influence on the willingness to buy when a firm offers cost-cutting opportunities or has advanced corporate culture. How-ever, we do not find any evidence that investment professionals are willing to pay a premium for any of the existing four post-merger integration value drivers introduced in this paper. Thus, while the importance of the different elements is acknowledged by investments professionals, especially of those factors providing long-term growth prospects, they do not price them in when actually buying the target. Integration efforts are considered, but not paid for in the early stage of acquisition.Interestingly, investment professionals in our sample are highly willing to invest post-deal-closure into areas that need additional attention to make the deal a success. More than 95% of professionals indicated that they would invest in additional resources for at least 4 weeks in case of trouble during synergy capture efforts as part of the overall post-merger integration program. More than 80% of professionals would also invest in additional resources if organizational design or culture and change measures progress slower or worse than expected. It seems to be that pockets are not empty to capture value during post-merger integration efforts, but investment professionals are more careful in which part and during which phase to invest additional (corporate) resources.Tab. 1 • Current economic setting: Which factors are taken into account when buying a target?
 <img class="c-image inline not-prose" src="https://cms.manda.co/storage/ma-review/2024/01/BCG-Austria_.jpg" alt=Tab. 1 • Current economic setting: Which factors are taken into account when buying a target? decoding="async" loading="lazy" />
 
Source: BCG analysis; PMI survey 2023Fig. 1 • Willingness to invest in additional resources during the post-merger integration process (in % of survey responses)
 <img class="c-image inline not-prose" src="https://cms.manda.co/storage/ma-review/2024/01/BCG-Austria_Fig.1_.jpg" alt=Fig. 1 • Willingness to invest in additional resources during the post-merger integration process (in % of survey responses) decoding="async" loading="lazy" />
 
Source: BCG analysis; PMI survey 2023<h3>5. Concluding Remarks</h3>The results of this study show that pricing of value capture during post-merger integration is nothing that is priced in from the beginning of a transaction cycle but rather something that is done on an adhoc basis throughout the process once obstacles arise. While the reluctance to pay a premium for post-merger integration-related elements could reflect a currently more risk-averse approach in initial valuations and professionals may be cautious about overvaluing potential synergies that are not guaranteed or are difficult to realize especially in current turbulent times, adjusting resources ad hoc can be potentially dangerous. Particularly, the failure to adequately account for substantial integration costs upfront can significantly undermine the value derived from the transaction. It becomes imperative, therefore, for professionals in this field to balance prudence with foresight, ensuring that post-merger integration costs are once again considered early in the transaction cycle. This balance will not only mitigate the risk of post-merger disappointments but also pave the way for a more efficient and effective integration process, ultimately maximizing the transaction‘s value in both stable and turbulent times.

One way of doing so could be to set up a dedicated post-merger integration program already before signing a deal in parallel to the due diligence phase. This way, a dedicated post-merger integration expert team can already help to define transaction perimeters for a smoother cooperation with the target. In this phase, the team can also help to define the integration governance and logic for smooth processes and value capture in advance and help to prepare the acquirer organization supporting the integration efforts. Delayed integration efforts or less-than-full value capture after signing and closing and the need to invest additional, not planned for resources on an ad-hoc basis becomes unlikely. <hr>1 See: www.bcg.com/capabilities/mergers-acquisitions-transactions-pmi/mergers-acquisitions-activity-by-year2 See: www.bcg.com/publications/2023/m-and-a-outlook-looking-up-after-bottoming-out3 See: www.bcg.com/publications/2023/bold-moves-for-m-and-a-dealmakers-in-volatile-markets4 See Devos/Kadapakkam/Krishnamurthy: How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies. The Review of Financial Studies, 22, 3, 2009, 1179–1211.5 See Gaughan: Mergers, acquisitions, and corporate restructurings. 3rd edition, New York, NY: John Wiley &amp; Sons, 2002.6 See Huyghebaert/Luypaert: Sources of Synergy Realization in Mergers and Acquisitions: Empirical Evidence from Non-Serial Acquirers in Europe. International Journal of Financial Research, 4, 2, 2013, 49-67.7 See Capron: The long run performance of horizontal acquisitions. Strategic Management Journal, 20, 1999, 987-1018.8 See Alexandridis/Fuller/Terhaar/Travlos: Deal size, acquisition premia and shareholder gains. Journal of Corporate Finance, 20, issue C, 2013, 1-13.9 See Shrivastava: Post Merger Integration. Journal of Business Strategy, 7, 1, 1986, 65-76.10 See: www.bcg.com/publications/2016/breaking-the-culture-barrier-in-postmerger-integrations

Diese Studie untersucht, wie Führungskräfte Integrationskosten und -aufwand bei einem Unternehmenskauf einpreisen.

Are we pricing in the way we integrate?

03) Subscription: mandaco online

02) Subscription: mandaco student