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Many M&A transactions fail to realize the intended value of the deal. As a result, more and more practitioners have discovered the importance of integration when it comes to value realization. Michael Devita, Success Strategy Lead at Salesforce, is a value advisor, which helps customers identify and realize the value they receive from their investments. In this article, he talks about the importance of integration and how to assess value realization.
“Overlooking the need for organizational commitment is the single biggest mistake that I've seen made and why most deals fail to deliver the value they seek.” - Michael Devita
Best Practices on Integration
As a lot of people might already know, integration needs to start as early as possible. There are a lot of things that we need to consider early in the process, and you need an integration lens to help.
As you involve integration early in the process, it is important to also involve the right people. According to Michael, one of the reasons why deals often fail is because deal teams tend to limit the expertise that is involved in a deal for confidentiality reasons. You need to make sure that you're not tied to a number, but tied to a necessary expertise instead.
Lastly, you need to learn to walk away from a deal. The deal model needs to guide your decisions, and not the other way around. In order to prevent deal fever, you need to create agreed upon guidelines on when to do the deal and when not to do a deal. Objectively document all the checkpoints that you want, based on numbers and red flags that you will encounter in the diligence.
Measuring Success
In addition, you also need to document and establish measurements of success. If you are truly integrating an acquired business into your system, it’s going to be hard to determine its impact. Everyone needs to agree on what a successful integration looks like and it needs to be as simple as possible.
You can start by agreeing on a baseline of what the acquired business should look like; things like profits and costs. Then, assign some factor for considering the impact of the profits and cost made by that acquired business. Constantly checking your indicators of success will allow you to pivot and course correct if you're trending in the wrong direction.
Improving Integration
Michaels strongly believes that if you want to keep executing M&A and integration at a high level, you need to have dedicated M&A resources. Not only can it save you money in the long run, but you will also get tribal knowledge of past deals. Dedicated M&A people will get to know your business very well, compared to outside services where you can have different people all the time.
And lastly, avoid sacrificing your business. Most people with full time jobs that get pulled into M&A deals experience burn out. Alleviating some of the burden on your business itself so the team can stay focused on the goals and operations is one of the best reasons to create dedicated M&A functions.
Conclusion
Integration is where you realize deal value and you need to focus on it from the very start. Involve the right experts early on in the process, and it is better if you have a dedicated M&A team.
Meanwhile, establish checkpoints and measurements for integration success. Everyone has to agree on what success looks like and everyone has to understand it. Having milestones will allow you to assess if you need to pivot or if you are achieving your strategic goals.