Mergers and acquisitions – maximising value after the deal

Mergers and acquisitions (M&A) activity in the small and medium-sized (SME) market is driven by a range of factors, most of which are underpinned by the desire to build value.

Corporate Finance Manager Phil Redgate explains.

The initial challenge for decision makers when appraising a target acquisition investment is to truly understand the value drivers in the combined business. The next hurdle is then ensuring that post-deal, those drivers underpinning the value are genuinely capitalised upon.

Most business combinations create an ideal situation to overhaul existing practices within both the target and the acquiror. Introducing new approaches such as zero-based budgeting can help to remove entrenched inefficiencies and build value.

It is important that decision makers critically consider their organisation’s ability to implement such strategies in order to avoid the all too common situation where cost savings or sales volumes are overestimated, and the deal fails to live up to expectations. This risk can be mitigated by undertaking the appropriate due diligence, taking the anticipated synergies into consideration.

Integration, oversight and change management programmes are then crucial to delivering the value in the business combination. The managers and teams delivering these programmes should be motivated to deliver the synergies with realistic targets and appropriate resources. Focusing on these areas can allow businesses to maximise and deliver the value potential of the deal.

Benchmarking against competitors and other industries using a mixture of financial and non-financial key performance indicators is then an effective method of monitoring the deal’s success.

Bishop Fleming provides a comprehensive range of corporate finance advisory services. For acquisitions this includes target searches, fundraising, financial modelling, due diligence and post-transaction acquisition integration.

For more information please contact a member of our Corporate Finance team.