World Monitor Magazine WM_Energy_ 2019_web | Page 55

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The big risks are overreach and loss of momentum. These can
be compounded by the temptation to use the transaction as an
opportunity to pursue pet projects. Corporate culture and talent retention are critical here. In
every unsuccessful deal covered in our research, cultural issues
were reported to have hampered efforts to realize value.
Our research showed that although virtually every company
develops a value creation plan, only 34 percent said value
creation was a top priority on the day they closed their most
recent transaction. It is therefore no surprise that high percentages of respondents
said they could have done more to understand cultural issues
before the deal closed and could have better managed these
issues during and after the acquisition process.
Maarten van de Pol, deals leader, PwC Europe, says: “Culture
takes a long time to develop and a great deal of effort to
maintain, but relatively little time to undermine. Communication
is therefore critical.”
Many more wished in hindsight that they had followed suit:
Two-thirds of respondents said that if they were to do their
most recent transaction again, they would make value creation
a top priority from the outset.
Similarly, 80 percent of survey respondents said a key
takeaway from their latest deal was that they needed to do
more to validate their value creation hypothesis in advance.
This highlights the clear benefits of prioritizing value creation
much earlier in the sale process — and continuing to focus on
it well beyond the deal.
a broad and detailed value
creation plan.
3 Create
Though important, prioritizing value creation is not enough.
The most successful acquisition blueprints are both detailed
and broad. Value creation plans should cover all aspects of
the deal, including strategic repositioning, improved business
performance, optimized operating model and technology
solutions, the balance sheet, and the right tax and legal structure
(see “Effective value creation plans are comprehensive”).
The same requirement for broad, detailed execution blueprints
applies to divestments — in fact, such blueprints are even more
decisive in ensuring that divestment deals create value than they
are in acquisitions. Some 89 percent of sellers reported that they
could have enhanced the value of the business being sold if they
had done more to optimize tax and legal structures, and another
89 percent said they could have done more to align the incentives
of senior managers before the business was divested.
on people, culture, and
intangibles.
4 Focus
As companies become more dependent on talent, technology,
and intellectual property and less on physical assets, issues
involving people and intangible assets steadily become more
important in planning how to realize value from an acquisition.
Talent engagement is probably the most important issue. Our
research showed that when a significant proportion of the
employees an acquirer had hoped to retain wound up leaving
the business after a deal, there was a high likelihood that value
was going to be eroded.
Successful deal makers try hard to hold on to key people. The
benefits are obvious: In the overwhelming majority of deals
that created value, the buyer managed to hold on to at least
90 percent of vital employees, and often more. But more than
80 percent of deals that destroyed value involved the loss of
1 to 30 percent of the staff the acquirer had hoped to retain.
in integration spending, which
pays dividends.
5 Invest
Our research shows that companies that spend more time and
money on integration of the acquired entity — and focus on
it early in the process — achieve better outcomes. More than
90 percent of acquisitions that created value spent more than
6 percent of the deal value on integration efforts. Some 93
percent of deals that destroyed value spent less.
Marissa Thomas, deals leader, PwC UK, says: “One of the
misconceptions in the market is that deal fundamentals such
as integration are post-deal issues. They absolutely are not.
Successful acquirers and investors work on integration and
other core value creation levers at the same time as they
conduct their diligence.”
Similar considerations apply to those on the other side of the
table. For sellers, successfully capturing more of the value in
play during a sale process involves issues including retaining and
incentivizing the critical employees in the division being sold to
ensure a smooth transition. Some 89 percent of sellers in our
supported by EUROBAK
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