World Monitor Magazine WM_Energy_ 2019_web | Page 53

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As a result, success in any transaction depends increasingly on
the ability to create value through operational improvement
alongside revenue growth. This places detailed, rigorous
value creation planning at center stage. The research revealed the same pattern for divestments.
Vendors that prioritized value creation outperformed their
industry peers by 6 percent, on average, as measured by total
shareholder return 24 months after completion.
The perception gap We have formulated seven steps that can help maximize value
creation in M&A.
PwC’s research highlighted a major gap between perception
and reality in deal value creation. Some 61 percent of
corporate executives believed their most recent acquisition
created value. But when we measured total shareholder
return, we found that 53 percent of the acquirers included in
the survey underperformed their industry peers, on average,
over the 24 months following the completion of their last
deal.
Acquirers that prioritized value creation outperformed their
industry benchmark in total shareholder return by as much
as 14 percent, 24 months after deal completion.
This apparent contradiction is easily explained: These
average figures encompass a very wide range of outcomes.
Even though more than half of acquirers underperformed,
a minority of M&A transactions were so successful that
they pulled up the average total shareholder return for all
acquirers significantly. This represents the familiar story of
a small number of transactions realizing significant value
while a long tail of poor deals destroys it.
the
opportunistic.
1 Prioritize
strategic over the
In acquisitions, deals driven by the strategic priorities of the
acquirer’s business following, say, a review of its existing
asset portfolio are more likely to succeed than opportunistic
transactions arising from the sudden availability of a target.
Eighty-six percent of deals that created value in our research
were strategic, compared with just 14 percent that were
opportunistic.
Strategic intent should be clear from the outset. Establishing
the key objective of your M&A strategy is vital. Is it future-
proofing your business by bringing in new capabilities?
Enabling your business to access fresh revenue streams? Or
even overhauling your entire business model?
“Deals that deliver value don’t happen by accident,” says
Bob Saada, deals leader, PwC US. “Transactions should be
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