LONDON, Oct. 16, 2012 /PRNewswire/ -- Global businesses are not
realising the full potential of cross-border mergers and
acquisitions (M&A) as a means of driving growth due to
weaknesses in the deal process. A new global study, The
M&A Blueprint: Inception to Integration, published today
by global law firm Eversheds, shows that deal teams need a more
holistic approach and stronger connections between the planning,
completion and post-deal integration phases.
http://photos.prnewswire.com/prnh/20121015/567786-a
http://photos.prnewswire.com/prnh/20121015/567786-b
The study involved more than 400 multi-national businesses* who
have worked on cross-border M&A deals in the past three years.
It shows that nearly half (43%) of businesses believe that the most
common cause for deals not successfully achieving their goals is
due to a failure to address post deal integration from the early
stages of deal due diligence.
The report also shows that legal risk is an increasingly important
consideration in the assessment of potential deals. General Counsel
provide essential input at this stage and more than half (59%) of
all respondents said they had spotted potentially damaging issues
early enough to caution management about proceeding with the
deal.
The research highlights that less experienced buyers are finding
the process challenging but even those with a wealth of knowledge
believe that there are improvements to be made.
Stephen Mok, Head of Corporate in the Hong Kong office of
Eversheds, said:
"The current economic climate has made the business of doing deals
much tougher, with the research highlighting an acute awareness of
risk in the process. However, company boards are under pressure to
secure growth and M&A is an essential business tool for
achieving this, in particular for organisations thinking about
tapping into or increasing their penetration in new international
markets."
"Our research shows that the overriding factor contributing to the
success of a cross-border deal, is the presence of a core team
providing the 'connective tissue' to link all the phases together,
taking the deal from the inception stage through to post-completion
integration. Businesses need to start joining the dots between the
different stages of the deal cycle to move the focus from just
simply 'doing the deal' to thinking about life for the business
beyond the deal."
"More than three quarters of Eversheds' deal activity is cross
border and we always advise our clients to adopt a project
management approach for the life cycle of the deal. This helps them
to focus on post-deal integration - and achieving maximum value
from the deal - from the outset."
"Our findings also show that many businesses know they can do
better and want to see best practice in action on each and every
transaction. So, with the publication of this report we have drawn
out the key areas that businesses have identified as best-practice
in the international deal-making process."
The M&A Blueprint: Inception to
Integration report sets out the blueprint for success in
cross-border deals as identified by deal-makers themselves:
1. Inception
- From the start - 38% of deals where the in-house team were
brought in too late suffered problems during integration.
- Early warning - 59% of all respondents said they had spotted
potentially damaging issues early enough to advise that a deal
should not go ahead.
2. Planning and due diligence.
- The crucial stage - 43% said the most common cause of the failure
to realise value in transactions was down to avoidable errors in
the due diligence and planning phase.
- Joined up thinking - 70% felt that linking due diligence and
integration planning together would help to improve the deal
process.
3. Deal execution
- What matters most - The reasons General Counsel would advise not
to proceed with a deal were illegality/regulatory (45%), e.g.
bribery, competition and antitrust, and commercial concerns (45%),
e.g. price and valuation, litigation risk, integration costs.
4. Integration
- A false saving? - 83% did not use external lawyers to a large
degree during integration, although they were acknowledged to add
value. The main reason for this was cost.
- Avoid mismatches - 26% felt that the failure to realise value in
a recent cross-border M&A deal was due to a misalignment
between legal dealmakers and the day to day business team.
The report also found that companies are two and half times more
likely to have faced problems with integration if the in-house
legal teams were involved late in the process. This is particularly
true for those who are less experienced in the deal process, with
the report showing that businesses whose in-house legal teams had
worked on less than ten cross-border deals over the past two years
were more likely to face problems in the integration phase.
Additionally, the report reveals that legal advice, both internal
and external, is currently brought in too late and not at a
strategic level. Appropriate proper legal advice at every stage in
the deal cycle is critical to the success of M&A
transactions.
The full report can be requested by emailing [email protected]
Notes to editors
* The research was conducted
between May 2012 and July 2012. The sample includes responses from
400 in-house deal-makers, from 41 different countries, who are
responsible for the legal aspects of cross-border M&A and who
have done at least one cross-border M&A deal worth over $100
million in the past three years.
About Eversheds LLP
Eversheds LLP and its world wide associate offices have over 4,500
legal and business advisers providing high quality legal services
to the private and public sector and business and finance
community. Access to all these services is provided through the
firms global operations. Eversheds combines local market knowledge
and access with the specialisms, resources and capability of one of
the world's largest law firms.
http://www.eversheds.com