European Post-Merger Integration Survey February 2010

Transcription

1 European Post-Merger Integration Survey February 2010

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3 Survey purpose and approach The purpose of this survey is to show drivers and barriers as well as keys to success in the post-merger integration process and performance across a number of European countries. The survey is compiled of responses from 250 M&A top executives in eight countries. In Switzerland, a selection of 53 companies participated. Population distribution by country Population distribution by industry 1% 9% 8% 16% 2% Switzerland Belgium Denmark Germany Netherlands 3% 16% 8% 8% 6% Business Services Construction & Real Estate Consumer Industrial Products & Services Public Sector Energy, Utilities & Mining France 3% Technology, InfoComm & Entertainment 42% 2% Italy Norway 56% Financial Services In order to participate in this survey, it was required that the company had completed at least one significant transaction in the last three years. Post-Merger Integration Survey 2010 PricewaterhouseCoopers 3

4 Key findings Focused pre-deal integration planning is crucial for reaching financial and strategic synergy targets. When integration planning is started in the pre-deal phase, 79% of the companies achieve expected cost synergies. In Switzerland, 80% of companies meet or exceed targets set for the acquisition. Speed is critical to successful integration. In retrospect, 62% of the companies would have chosen to integrate faster. Primary focus would have be on more detailed planning, improved communication to stakeholders and earlier involvement of the integration team. The key integration challenges European respondents face are; motivation of employees, alignment of cultures, organisation and processes as well as IT systems. In Switzerland motivation of employees is considered a smaller challenge (34%) compared to other countries (51%) whereas Swiss companies are more challenged by the alignment of processes (57%) in contrast to the European average (34%). Alignment of integration goals with personal goals is key. Only 32% of integration leaders are incentivised with qualitative and/or quantitative KPIs to achieve integration goals. 4 PricewaterhouseCoopers Post-Merger Integration Survey 2010

5 Increasing market share and growing revenue are the main objectives driving M&A activity. Cost synergies are prioritised second Return on equity Top financial goals 19% Reduction in number of competitors Top strategic goals 19% strategies typically anticipate synergies from entering additional markets or accessing new distribution channels. PwC experience Return on invested capital Access to new products 23% EBIT 31% Access to new geographical markets 33% Overall synergies Revenue growth 35% 42% Achievement of cost synergies Growth in market share 0% 40% 0% 37% 58% 40% 60% Consolidated Consolidated Post-Merger Integration Survey 2010 PricewaterhouseCoopers 5

6 The majority of survey companies start planning the integration in the pre-deal phase. This is a positive change from previous surveys and indicates that companies have learned from their mistakes When did companies start to plan their integration activities? 31% Prior to closing After closing Most of the key decisions about integration are made during the planning stage, but we go into very high gear to implement them rapidly on signing day. There is no value in delay, planning integration after closing is too late. PwC experience 69% NOTE: Consolidated results 6 PricewaterhouseCoopers Post-Merger Integration Survey 2010

7 Only 60% of Swiss companies commence integration activities in the pre-deal phase. In consequence they are less prepared for integration than their European peers Start of planning the integration activities 100% ecution per country 80% 70% 60% 60% 82% 77% 40% 90% 76% 67% 73% 66% 59% 66% Critical Day One must-win battles need to be identified early, before long-term detailed planning commences. A detailed plan should be created, including all actions which will be put in place on Day One. Planning for Day One should be parallel to the due diligence process. PwC experience 39% 0% Tax/Legal Commercial HR Prior to closing Pension Fund IT Environmental Switzerland Belgium Belgium Denmark Denmark Germany Germany Netherlands Average of selected countries Post-Merger Integration Survey 2010 PricewaterhouseCoopers 7

8 Companies prioritise financial due diligence as a means to evaluate their acquisition decision. Due diligence disciplines with a focus on integration challenges receive less attention Due diligence per country 100% 80% 85% 82% 77% 60% 66% 59% 66% More thorough IT due diligence (should have been conducted). More focus on customers, synergies and markets. Respondent 40% 39% 0% Finance Tax/Legal Commercial HR Pension Fund IT Environmental Switzerland Belgium Denmark Germany NOTE: No country data available for the Netherlands Average of selected countries 8 PricewaterhouseCoopers Post-Merger Integration Survey 2010

9 Overall transactions are perceived as a success more than 80% meet their targets Achievement rates of synergy and performance targets in total 15% 13% 6% 66% No. of companies that meet or exceed synergy and performance targets by selected country 100% 80% 60% 80% 73% 95% 85% 83% Previous studies show that 70% of deals fail to realise the value set out. Our experience shows that acquisitions rarely fail due to flawed strategy, rather failure is most often a result of the strategy not being executed in a timely fashion. PwC experience 40% Met targets Exceeded targets Failed to meet targets No targets set 0% NOTE: Consolidated results Switzerland Denmark Belgium Germany Average of selected countries NOTE: No country data available for the Netherlands Post-Merger Integration Survey 2010 PricewaterhouseCoopers 9

10 On average, 32% of key decision makers compensation is linked to integration success Percentage of linked compensation schemes to integration goals CEO 41% More involvement on behalf of the integration team rather than them seeing it as an a side job. Respondent Division Lead 34% CFO / Head M&A / Head Business Development 32% Integration Leader 30% Board 0% 18% 32% 40% NOTE: Consolidated results 10 PricewaterhouseCoopers Post-Merger Integration Survey 2010

11 Communication is handled sucessfully only in one third of all deals Communication of integration goals 38% Analysts/Shareholders/Public 38% 42% 30% Customers/Suppliers/Vendors 18% 38% More attention to communication, provide clarity for all involved. Communicate more openly, detect hidden frustration. More focus on the employee s feelings, and improve as well as simplify communication. Respondent Employees 30% 41% 43% 53% Board/Management 65% 67% 0% 40% 60% Before closing First 100 days After 100 days 80% NOTE: Consolidated results Post-Merger Integration Survey 2010 PricewaterhouseCoopers 11

12 Early planning of integration activities is critical to reaching M&A targets across various synergies 100% 80% 60% 40% Achievement rates of M&A objectives, based on full achievement 14% 21% 27% 27% 26% 86% 79% 73% 78% 74% Well-defined (organisational) structures must be established as soon as possible. Define integration strategy and team three months prior to closing. Respondent 0% Achievement of cost synergies Enlargement market share Revenue growth goals Access to new Access to new products geographical markets Companies that started planning their post deal integration before closing the deal Companies that started planning their post deal integration after closing the deal NOTE: Consolidated results 12 PricewaterhouseCoopers Post-Merger Integration Survey 2010

13 Integration spending can be a significant cost component when compared to overall transaction value and is underestimated in 40% of the cases cution per country 82% 77% 66% No. of companies that exceed budgeted integration costs per country 50% 48% 39% 44% 36% 40% 31% 25% Tax/Legal Commercial HR Pension Fund IT Environmental 59% 66% Overcoming the complexities and costs in the integration of IT systems, operating procedures and management practises has proven a daunting, disruptive and overwhelming task for many. PwC experience 0% Switzerland Belgium Denmark Germany Switzerland Belgium Denmark Germany Average of selected countries NOTE: No country data available for the Netherlands Post-Merger Integration Survey 2010 PricewaterhouseCoopers 13

14 Motivation of employees and alignment of IT systems are top challenges across European countries. In Switzerland, alignment of processes and different cultures are considered as the biggest challenges 51% Top 5 challenges of integration in total Motivation of employees Top 5 challenges of integration in Switzerland 34% We should have made a clearer choice for one IT infrastructure and one set of administrative processes rather than trying a best of both worlds solution. 50% Alignment of information systems 47% Respondent 47% Alignment of different cultures 53% 46% Alignment of organisation 45% 34% Alignment of processes 60% 40% 0% 0% 40% 57% 60% NOTE: Consolidated results 14 PricewaterhouseCoopers Post-Merger Integration Survey 2010

15 Boards should be involved to a greater extent in the post-deal phase, while integration teams should have a more active part prior to closing Board Involvement of the board, integration team and advisors 33% 18% 49% Involve advisors at an earlier stage. Involve integration team much earlier. Respondent 44% 22% 34% Integration team 35% 21% 44% 21% 14% 65% Advisors 42% 29% 29% 65% 15% 0% 40% 60% 80% 100% Low Medium High NOTE: Consolidated results Post-Merger Integration Survey 2010 PricewaterhouseCoopers 15

16 More than 60% of respondents would have liked to have integrated faster. In Switzerland, however, only 28% share this sentiment Would you have liked to have integrated faster? 70% Yes 60% 62% 50% Uncertainty paralyses always. Respondent Well-defined structures must be established as soon as possible. Respondent 40% 30% Yes 28% 10% 0% International results Swiss results 16 PricewaterhouseCoopers Post-Merger Integration Survey 2010

17 More up-front detailed planning, earlier involvement of the integration team and better communication during the deal are the key learnings from doing deals What would companies have done differently if they repeated the integration? More detailed integration planning up-front Improve communication 15% Set up and involve integration team early Improve the quality of due diligence 11% 15% Involve management of acquired company in the integration More focus on managing cultural differences 9% 9% Stricter decision-making 8% Earlier planning of integration 6% Defining better involvement of external advisors Allocate more resources 4% 4% NOTE: Consolidated results 0% 5% 10% 15% Post-Merger Integration Survey 2010 PricewaterhouseCoopers 17

18 Contacts Gustav Baldinger Partner Consulting Dr. Ralf C. Schlaepfer Partner, Leader Consulting Beat Dällenbach Partner, Leader s beat.daellenbach@ch.pwc.com 18 PricewaterhouseCoopers Post-Merger Integration Survey 2010

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