10 years later, KPMG advice rings true for M&A best practices

While researching the annual (and coveted) KPMG 2015 M&A Outlook Survey (CLICK HERE), their 2005 report Googled up to the surface. What stood out is that the best practices offered by M&A champions exactly ten years ago remain germane.


Certainly, the technologies have improved to make the processes smoother ie: our virtual data room, (VIEW VIDEO DEMO) but the actual success strategies has remained solid and steadfast.



Survey respondents indicated that nearly twice as many non-M&A staff people work on deals as “core” M&A staff. On larger deals, an average of four M&A employees work on a transaction, and another eight from other business units. Companies learned that leveraging resources and sharing responsibilities among internal channels increases the chance of success.


Leading M&A departments tend to implement distinct deal hurdles, through two main methods: the use of sequential committees — where proposals are approved before additional resources are committed — and the implementation of a more thorough transaction documentation process. Almost 75 percent of survey participants indicated that incorporating additional structure increases the effectiveness of an M&A team.


The KPMG survey data revealed that M&A groups who rotate staff between business units are more likely to achieve deal success than those that don’t promote such rotations.


Companies that use their corporate development groups to help quantify synergies and integration costs stand a greater chance of achieving those objectives than those relying solely on the expectations of their business units. It is incumbent upon the corporate development team to perform their own check of the numbers to ensure validity. While conflicts of interest at business units may occasionally play a role, interviews with executives cite lack of training and perspective in the business unit as the key reason to leverage M&A staff in this task.


M&A executives need to know how deal activity is being monitored, whether expenditures are on target, whether synergies are being realized and whether operating metrics are being reached. Only 11 percent of survey respondents have a formal system to track deal flow, and few participants track expected synergies or costs on a majority of deals. Furthermore, most executives cited lack of training and tools as a primary impediment to improved efficiency.


Many survey participants found significant value in creating separate investigations and work streams for assessment of the target company, the market, and the integration itself. Making these efforts distinct improves focus and makes the due diligence process replicable, which participants almost unanimously believed improves the likelihood of success.


According to the study, 75 percent of transaction opportunities originate from outside the corporate development group; business units account for 28 percent of sourcing activity, followed by the parent company with 26 percent. Fewer than 20 percent of deals originate from law firms, investment banks and other external entities.


Study participants indicated several benefits to contracting external advisers during the deal process. Of the companies that hire due diligence consultants, 95 percent do so primarily to gain independent validation of key transaction assumptions, such as market drivers, competitive positioning or accounting analysis. Furthermore, while companies spend, on average, approximately $11 million per year on external advisers, roughly 80 percent of the expense comes from these three types of advisers: investment bankers, consultants and lawyers.


Whether it is via internal committees or third-party advisers, companies should always validate key transaction assumptions and diligence findings. Fully independent checks help ensure that deal staff have not overlooked key issues or made excessively aggressive assumptions, particularly since they may be unduly vested in the outcome. Executives say this vetting process is important no matter how experienced the deal leader is

Same as it ever was. Sounds right.

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