Culture counts in post-deal success | KPMG | AU
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Culture counts in post-deal success

Culture counts in post-deal success

Everyone needs to align behind a ‘Northern Star’, and seize the opportunity for transformation, if a company’s future beyond the deal is to be bright.

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National Managing Partner, Global Strategy Group and Brand & Engagement

KPMG Australia

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Snow capped mountains

A strategic fit, as well as a clear outline for value creation post deal, is important to achieve a successful deal outcome, according to 67 percent of respondents to KPMG’s Evolving Deals Landscape 2018.

“A clearly articulated and agreed strategic outcome from the deal will drive target selection or sale options, says Margaret Cowle, National Managing Partner, Global Strategy Group, KPMG. “If you don’t have a strategic fit, then you end up with an acquisition that doesn’t achieve the benefit that has been defined.”

In short, this is having a clear goal for the merger or acquisition (M&A) – such as to expand a portfolio, gain expertise such as technology IP, or to consolidate capabilities in the market.

Cowle says few organisations set out on M&A without strategy – but they can fall down when it comes to a plan, or sticking to a plan, for post-deal value creation.

“What can be missing is, once the deal is completed, having the guiding principles, or that ‘Northern Star’, that everything is grounded in. Sometimes everyone is thrown into business as usual, without having that guiding ‘light on the hill’,” Cowle says.

Key to this is aligning company cultures, with the survey showing that 48 percent of respondents listed this in their top three factors for deal success. Here we look at the importance of a post-deal value creation strategy, and how considering company culture as part of this is vital.

Post-deal strategy

Leadership and the M&A team can be razor-focused on striking a deal – and may forget that it will be up to the rest of the business to bring the new arrangement to life.

“The business may not have been on the journey all the way through. Therefore the initial strategic intent and financial intent may not be understood, believed in and followed through,” Cowle says.

To get on the front foot, she says it is essential to have key business owners embedded earlier in the deal process.

''This means that the financial and strategic intent is owned by the business – and aligned all the way from the idea and intent through to the actual execution of the deal and beyond.”

Culture counts

Amid talk of strategic and financial synergies, it can be easy to dismiss the impact that company cultures will have on post-deal outcomes.

“In most pre-deal situations, the cultural and people side is not as clear a driver of deals as it should be. For example, does this organisation and the people in it have a similar set of values and culture to us? Are the ways of working and business practices aligned with ours?” 

KPMG’s survey showed that culture was the most challenging aspect of post-deal integration for 75 percent of respondents.

“Culture can be where deals often fall apart – and if you don’t look at that upfront then you have no idea what you are dealing with post-deal – not aligning the required synergies with how people think and work is can cause a deal to fail or deal outcomes to be delayed,” Cowle says.

Upfront assessment of cultural dynamics in all organisations involved can smooth out the integration of people, behaviours, expectations, ways of working, and processes. And if cultural misalignments are understood, there is an opportunity to take the best of both worlds and focus on a more holistic transformation, Cowle says.

“Ask, ‘what could be a best practice organisation merged together?’ So you don’t just integrate another organisation, but build a better one with the two together.”

A holistic approach

The most successful M&A occur when the strategic intent is clear upfront, there is a clear strategy and plan for post-deal value creation, and cultural alignment is given equal consideration.

“Focus on a synergy assessment around the whole business – not just the financial due diligence, but the operational synergies, the commercials, the people, and the cultural assessment – they are all part of your due diligence.”

And of course, consider the transformative potential of the deal when the best of both organisations are taken on board.

“It is not just looking ahead in the context of the target, but in the context of an immersive organisation.”

Having the right external, independent advice throughout the entire deal process can also make a clear difference to its success.

“At KPMG we work with clients throughout the deal, and help them see, what is the new organisation, what are the pitfalls, what are the lessons, what have we seen others do, and how?”

 

The deals landscape looks bright for the year ahead, but only for those ready for the opportunities. Find out more in M&A boom means it’s time to prepare.

“At KPMG we work with clients throughout the deal, and help them see, what does this look like, what are the pitfalls, what are the lessons, what have we seen others do, and how?”
“At KPMG we work with clients throughout the deal, and help them see, what does this look like, what are the pitfalls, what are the lessons, what have we seen others do, and how?”

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