Deal makers can still create more value in the age of complex M&A

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According to KPMG’s report showcasing practical steps on how to win in an age of increased deal complexity

The business landscape is ever evolving and has become more complex. Driven by market forces and trends, the Deals stage, specifically Mergers and Acquisition (M&A) activities, are being influenced and driven by these complexities. More and more, organizations are considering ‘deal-making’ as a critical part of their growth and evolution strategies and an efficient option to obtaining and expanding capabilities, keeping up with market trends and developments, as well as facing complex challenges. According to KPMG’s ‘Navigating complex M&A’ survey report, the transaction deal value continues to rise, and the pool of attractive targets is shrinking in some industries. All this change calls for deal makers to maintain an unwavering focus on strategic deal value, relentlessly pursuing synergies, and preventing value leakage with a more robust execution model across the entire deal cycle.

According to the report, 90 percent of the surveyed executives said deals are becoming more complicated, with 70 percent viewing more than half the deals they had done in 2021 as complex. A complex deal might require the buyer to step out of their comfort zone to enter a new line of business or radically shift their operating model. It’s also likely to involve additional complexities, such as the need for business-process transformation, digital intervention, or new tax structures. 

Camille Geadah, Deal Advisory Director at KPMG in Bahrain, elaborated on the report findings and said “We are increasingly witnessing companies acquiring new capabilities to respond quickly to new challenges rather than building it ground up internally. For example, a number of non-tech companies are buying ‘early-stage’ tech companies that help digitize operations or help them navigate into entirely new marketplaces. Such acquisitions are forcing a more complex aspect to deal execution and post deal integration. However, I believe that deal makers who develop and maintain a greater strategic focus on value while understanding the 7 major drivers of complexity and balancing their approach to the specifics of the deal have better odds of leveraging on good deal making and winning in today’s complex market conditions.” 

M&A executives are often assuming more operating risk and pursuing extraordinary synergies that enhance relationships and partnerships. They must also consider such factors as managing talent, some of it new and unfamiliar to the existing business model, in a tight labor market; as well as being relentless in seeking to satisfy investor demands on Environmental, Social, and Governance (ESG) concerns. 

According to the survey report, companies may take five practical moves to improve their odds of success when they undertake a complex transaction:

  • Make strategic value your ‘north star’

The ultimate payoff from complex deals is often strategic value – new opportunities or new ways of doing business that build long-term value. These deals transcend traditional synergies. They are also a market signal to investors, customers, competitors, and employees —a stake in the ground that demonstrates conviction in a bold vision. The strategic goals of the transaction, therefore, must be clearly defined, widely supported, and pursued methodically and relentlessly.

  • Play offense to win during diligence

Diligence should not be a ‘check the box’ exercise to validate baseline assumptions. It’s your opportunity to identify even greater sources of value and explore the art of ‘what’s possible’ with target management. It’s also an opportunity to ensure your own organization is clearly aligned around key ‘levers of value’.

  • Get a ‘running start’ before Day 1

Complex deals demand a different approach to ‘Day-1’ readiness – one with greater purpose, intensity, and speed. Sophisticated buyers use the ‘sign-to-close’ window to protect business momentum, find and mitigate blind spots, continue to seek even higher synergy upside, and accelerate tailored integration planning.

  • Adopt a people strategy for the times

More than ever, the value of a target lies in the capabilities, energy, and culture of its people. Tight and evolving labor markets raise the risk of losing talent—and reduce the likelihood of quickly finding replacements. To make complex deals work, you need a people strategy fit for today’s talent realities.

  • Think continuous value creation

Buyers define synergy targets at the outset, but they shouldn’t stop there. Be alert to new opportunities that arise and prepare to flex as markets, leadership, and strategies evolve.

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