Navigating Complex M&A: Five Moves For Success

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.

Increased complexity in M&A has created new challenges for deal makers. But business leaders can succeed with complex deals by understanding the additional challenges created by complexity and taking a systematic approach to addressing them.

Based on observations from KPMG deal professionals from around the world who work across industries and serve clients of varying company size and buyer sophistication, we outline five practical moves companies can take immediately to improve their odds of success when undertaking a complex transaction. These moves emphasize enhanced ways of thinking and require shifts in mindset, ambition and execution. They are, however, not exhaustive; each transaction will require a tailored approach.

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. The strategic goals of the transaction, therefore, must be clearly defined, widely supported and pursued methodically and relentlessly.

It starts with leaders from both the buyer and target establishing a combined vision around strategic value. This “north star” sets the stage for execution and should be translated into tangible goals and objectives for leadership. As it relates to the most significant risks and synergies, key individuals who bring elevated commercial and operational value to bear should be involved early on. A cadence of effective strategic reviews that continuously “restate” the core elements of strategic value can keep executives and teams aligned across time.

Play offense to win during diligence

Diligence should not be a “check the box” exercise to validate baseline assumptions. Deal teams need to stretch further in search of greater value. This requires harnessing the power of data analytics to unearth new opportunities. Diligence is also your opportunity to explore the art of what’s possible with target management. Buyers should proactively engage with their soon-to-be colleagues to gain new and deeper insights, validate key assumptions, build buy-in around strategic value and enlist the target management’s help to imagine and design the future. Meanwhile, buyers should ensure that their own organization is clearly aligned around key levers of value with a candid inward assessment during diligence. Ask yourself what you need to do to be the best owner of the new business.

Get a running start before Day 1

The moment a complex deal is announced, the stakes couldn’t be higher. Risks are immediately elevated around customers, talent, suppliers and other key stakeholders. As such, 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.

To increase the odds of success, sophisticated buyers also establish a small high-functioning team (a “Launch Team”) built to act fast. This agile, highly bespoke team of six to eight people launches immediately upon signing and is responsible for accelerating the pace and success of the transaction. Its mission is to move with the highest levels of focus, intent, speed and empowerment to protect and create value in line with the deal’s “north star.”

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. Losing talent can make it impossible to achieve the deal’s objective. Understand what positions and capabilities are most critical to success, current attrition rates by key employee group, time to fill open positions, sources of available labor and recruiting processes. Then create targeted incentives.

The target’s employees need to want to work for you. Buyers need to be transparent about their plans and present the target’s employees with a clear and compelling value proposition that is connected to the strategic goals of the deal. Communicate the goals of the transaction, build trust and excitement, and enlist your new employees in your quest for strategic value. Assume that all employees are looking for an opportunity to flourish and contribute, then create a supportive, nurturing employee experience.

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. Beware of backsliding: after the integration reaches key late-stage milestones and initial synergy targets have been achieved, don’t assume the gains will stick. Don’t lose sight of the “north star” that inspired your transaction.

Learn more in KPMG’s latest report, Navigating Complex M&A: how to win in the age of the complex deal.