The M&A Playbook Needs a Change. Are CFOs Ready?

To successfully capitalize on the changing nature of dealmaking, M&A leaders should adopt these four behaviors to unlock the full value potential.
J. NeelyApril 11, 2023
The M&A Playbook Needs a Change. Are CFOs Ready?
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Mergers and acquisitions reached record highs in recent years, with volumes crossing $5 trillion for the first time in 2021. Yet, macroeconomic headwinds, including high inflation, labor shortages, and supply chain volatility, derailed this pattern last year and instead shaped a much more subdued market.

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J. Neely

An Accenture analysis of more than 5,330 M&A deals over 10 years found companies changing their deal strategy to pursue multiple, smaller deals at a faster rate. These “string of pearl” deals are especially relevant for companies that want to enter new markets, new products, or tap into another customer base.

M&A leaders that successfully capitalize on the changing nature of dealmaking have adopted the following four behaviors that unlock the full value potential.

1. Create a Robust M&A Capacity to Manage the Increase in Deals

Growth-oriented deals now account for more than half (51%) of M&A activity. Leaders would benefit from building an M&A capability that can handle more acquisitions in a shorter time frame. At the same time, acquirers must take a long-term view of acquisitions, identifying the right targets while ensuring the deals align with their business objectives.

Addressing current and future needs requires investing in an “always-on” approach. This includes building capabilities that can quickly and more efficiently identify opportunities, as well as capture and apply lessons learned on the next deals, including ways of working or integrating cultures.

2. Technology Drives Value Faster

M&A deals have historically leveraged technology on a one-off basis, and half of the time, chief information officers entered the deal cycle only after diligence. But as deals become more technology-driven — 36% had technology underpinnings in 2020-2021, compared with fewer than one in four in 2012-2013 — there’s an opportunity for technology to help accelerate dealmaking.

In fact, leaders are leveraging technology like the cloud throughout the deal process, using digital tools to track each stage, from identifying a target all the way to integration of the purchased business. 

For example, a recent merger in the oil and gas industry that leveraged the cloud saw a 30% reduction in technology infrastructure costs. For each dollar invested, the company reaped a dollar in recurring savings. In a typical case, technology savings would require at least double the investment for the same recurring savings.

3. Maintain Innovation During Post-Merger Integration

Once a company is acquired, the focus moves to merging systems and departments or functional areas such as finance and accounting. In the process, innovation takes a backseat, and suddenly, it’s been a year of minor or no innovation. However, by adopting an agile integration method that tackles activities in short sprints and prioritizes quick decision-making, leaders can ensure continuous innovation even during M&A integration.

Take the example of two European utility companies that used an agile method for post-M&A integration activities aimed at customer retention. Cross-functional teams from both organizations worked together to prioritize and test scenarios for retaining customers. They had the space to fail, learn, and move quickly since they could test various options during this time without long-term consequences.

4. Nurture Talent and Ecosystems

While technology is a powerful tool, people make it work. That’s why, apart from innovation, deals should also focus on addressing the talent side of the equation to maximize M&A value. Building rapport with the acquired team by engaging them early and often can lead to better integration.

That’s exactly what a consumer goods giant did when it acquired a beverage business. Following the deal, the acquirer focused on retaining key talent to preserve the beverage company’s strong innovation culture. The merged company was able to minimize the departures of key personnel, which helped to maintain team morale, prevent a loss of historical knowledge, and keep overhead costs consistent.

While M&A deals can lead to increased growth, they can also come with their fair share of challenges. And while the current economic outlook is unclear, the window for larger, more transformative mergers will reopen at some point. Now is the time for companies to refocus their portfolios and get themselves ready for what comes next, and that means changing their playbooks.

J. Neely is senior managing director for mergers and acquisitions within Accenture Strategy