Deal-making due diligence missing post-transaction integration concerns
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The due diligence process is failing to fully identify post-deal integration issues, law firm Eversheds says.
Businesses around the world are not making the most of important mergers and acquisitions due to a failure to plan for the future.
A study from London-based law firm Eversheds reveals that 43 per cent of companies surveyed identified the most common cause for deals not successfully achieving pre-set goals as a failure to address post-deal integration from the early stages of transaction due diligence.
Its M&A Blueprint: Inception to Integration report suggests that deal teams need a 'more holistic approach' and 'stronger connections' between the planning, completion and post-deal integration phases.
The firm interviewed 400 multi-national businesses which have worked on cross-border M&A deals in the last three years.
Legal risk is seen as an 'increasingly important consideration' in the assessment of potential deals. Half of all respondents admit to spotting 'potentially damaging issues' early enough to caution management about proceeding with the deal.
Robin Johnson, M&A partner at Eversheds, says the current environment has made doing deals a lot tougher, and believes the research highlights an acute awareness of risk in the process.
'However, company boards are under pressure to secure growth and M&A is an essential business tool for achieving hits, in particular for organisations thinking about tapping into or increasing their penetration in new international markets,' he adds.
'Our research shows that the overriding factor contributing to the success of a cross-border deal, is the presence of a core team providing the "connective tissue" to link all the phases together, taking the deal from the inception stage through to post-completion integration.'
Johnson is urging business to 'start joining the dots' between the different stages of the deal cycle to move the focus away from 'just doing the deal'.
Further results from the study shows that some 38 per cent of deals where the in-house team were brought in too late suffered problems during integration, while 26 per cent feel that the failure to realise value in a cross-border M&A deal can be attributed to a misalignment between legal dealmakers and the day-to-day business team.