Catching a Second Wave: Capturing Unrealized Value From Past M&A
Cost synergies and performance improvement opportunities often are not fully realized during initial post-merger integration (or PMI) efforts. Many of our clients therefore have initiated “second wave” efforts, 2-5 years after a merger or acquisition has closed, to unlock these additional synergies or benefits. In some cases, we have seen companies wait 10+ years to capture the full value from prior M&A deals. These efforts, typically communicated as productivity or operational effectiveness programs (and never as an integration exercise), can reduce costs by up to 20 percent in the areas examined.
The current economic climate dictates that now is a good time to revisit earlier mergers and acquisitions:
- Little M&A activity is occurring now, so your business development staff can conduct a postintegration review or “audit” to assess whether intended synergies and value from prior M&A have been fully realized. During such a review, current operational approaches and already realized synergies are compared to the plans that were established during the earlier deals’ due diligence and synergy study processes.
- Earnings and cost pressures provide an incentive to review prior post-merger integration results and the motivation for the senior management team to address the “tough” decisions that may have been bypassed before and develop plans to capture the untapped value.
- Determining whether the originally intended synergies and value have been already harvested or are still available is a first step toward capturing unrealized synergies and contributing value and earnings later this year and certainly in 2010.