Inside Corporate M&A

The Formula of the Fittest

By Mirko Dier, Moritz Kbel, Artur Meinzolt and Hans Langthaler

Table of contents
Executive Summary

Introduction

Market Relevance of Serial Acquirers

Challenges of Serial Acquirers

M&A Processes

10

Accenture M&A Maturity Model

12

M&A Fitness

14

M&A Strengths and Weaknesses

16

Ideas for Improvement

18

Conclusion

23

Research Methodology

24

About the Authors

26

Executive Summary
Throughout the 1980s and most of the
1990s, mergers and acquisitions were
rare occasions. In fact, it was not until
the end of the 1990s that the volume
of global M&A deals broke through
the 10,000 mark, ultimately achieving
a record number of more than 46,000
transactions during 2007. Hence, before
2000 M&A was regarded largely as an
art performed mostly by specialized
advisors external to the buyers
organization. Today, however, the
M&A market has become more mature,
and M&A itself has evolved from an art
into a science and a more formalized
corporate discipline. The more deals
that are done, and the larger these deals
become, the more a company must
have its own repeatable methodology,
strong governance, formal metrics, and
a broad set of internal skills to reduce
deal volatility and risk while maintaining
the consistency with which M&A
projects are executed.

2 | Inside Corporate M&A

To be sure, many companies are working

on defining and improving their M&A
capabilities. Yet while M&A experience
and opinion abounds, there is limited
understanding of precisely which
practices and organizational factors
drive sustainable M&A success. To help
shed light on this issue, Accenture has
conducted one of the most extensive
and robust M&A benchmarking research
studies to date, involving an in-depth
analysis of 110 companies that
participated in more than 2,500
M&A deals from 2007 to 2009.
Throughout this study, we focused on
companies that engage regularly in
M&Aenterprises we dubbed serial
acquirersto analyze their deal-making
DNA and thereby identify ways all
companies could improve their own
M&A performance. Our research has
revealed a number of compelling findings:

Serial acquirers drive the market

They represented just 9 percent of
all acquiring companies involved in
mergers between 2003 and 2009, but
accounted for approximately one-third
of all deals executed and nearly onehalf of the total deal volume during
that period.

Serial acquirers deals are larger

and more complex
Serial acquirers tend to pursue bigger
deals that regularly span two or more
countries (often in emerging markets).

Serial acquirers face

considerable challenges
To keep their pipeline full, serial acquirers
must focus on multiple deals at once
and manage a portfolio of projects
throughout all stages of the deal lifecycle. Due to their greater willingness
to take on bigger deals and targets in

emerging markets, serial acquirers also

are more likely to encounter deals with
greater complexity stemming from
regulatory challenges, infrastructure
obstacles, and language and cultural
barriers. Furthermore, Accenture found
that as they continue to pursue new
deals, serial acquirers must be careful
to avoid empire building or managerial
overconfidence. Serial acquirers also
must be vigilant about preventing their
M&A capability from becoming costly
overhead or a cash-burner. And they
must find ways to effectively transfer
their knowledge and experience from
deal to deal.

Serial acquirers have room

for improvement
While most serial acquirers Accenture
studied are very strong in traditional
M&A processesthose involving M&A
governance, strategy management,
and transaction managementthey
are comparatively weaker in merger

integration and in the supporting

processes of M&A performance and
knowledge management.

Sustainable M&A success is based

on mature capabilities
Accenture discovered that the most
successful acquirers are neither the
companies that have completed the
most M&A deals nor the ones with the
most M&A experts on staff. Rather,
we found significant evidence that
serial acquirers achieve superior M&A
performance by developing certain
distinctive and robust M&A capabilities.
In fact, companies with an M&A
capability that features mature and
sophisticated M&A processes achieve
better results in all dimensions of M&A
performance: They are more likely
to deliver M&A projects on time and
within budget, and are more successful
in achieving the financial and strategic
targets of M&A transactions.

A robust M&A capability is a

source of competitive advantage
In times when business environments
are increasingly turbulent, M&A
enables change and corporate renewal.
Therefore there is a strong correlation
between M&A capabilities and corporate
performance. In fact, serial acquirers
with M&A capabilities of above-average
maturity outperform their industry
peers in terms of overall growth and
value generation.
In the following pages, we review the
key findings of our research in more
detail, introduce a new maturity model
for evaluating and benchmarking the
strength of M&A capabilities, and explore
some key M&A best practices that
emerged from our analysis. We also
discuss steps companies can take to
improve their M&A function and, in the
process, vastly improve their M&A success
rate and overall financial performance.

Introduction
Companies have always used M&A as a way to increase
revenue and market share and gain leverage over competitors.
However, traditionally most enterprises treated an acquisition
as a project to be completed, assembling a team of internal
(and in many cases, external) resources to identify a target,
conduct due diligence, execute the deal and integrate the
acquired entity. After the project, the team would be dispersed
and returned to their regular jobs. When the next opportunity
arose, a new team would be assembled, and the process
would be repeated.

Such an approach worked well in an

era when acquisitions were less frequent,
complex and competitive. But today,
with more companies executing more
dealsand the size and scope of those
deals growing exponentiallyM&A
must become a core competence. In
other words, M&A must become just
like any other established corporate
function, staffed full-time with
experts skilled in the discipline of
M&A and supported by formal processes
and methods.

4 | Inside Corporate M&A

This is especially true for what we call

serial acquirers. For these organizations,
which rely more heavily than other
companies on M&A as a source of
competitive advantage and growth,
having a formal business function
focused exclusively on M&A is vital
to success.

Market Relevance of Serial Acquirers

One of the defining characteristics of
serial acquirers is their vast market
relevance. Although scarce in number,
serial acquirers have an outsized impact
on the M&A market. In studying the
last wave of mergers between 2003
and 2009, we found serial acquirers
represented only 9 percent of all
acquiring corporate companies. However,
they accounted for approximately
one-third of all deals executed and
nearly one-half of the total deal volume
during the period that was the subject
of our research (see Figure 1). In the
future, we expect this figure to rise,
as 57 percent of those studied believe
they will undertake more M&A projects
from 2011 to 2013 than they did from
2003 to 2009.

Figure 1. Overview of M&A activities by type of acquirer1

Serial acquirers were most likely

to be found in the industrial, high
technology, and consumer products
and services industries (see Figure 2).
In the telecommunications and energy
industries they are especially influential,
accounting for 53 percent and 46
percent, respectively, of all deals done.

Figure 2. Overview of serial acquirers by industry1

9%

35%

100%

44%

91%

Serial
acquirers
Occasional
acquirers

65%
56%

Acquiring
companies

Number
of deals

Deal
volume

Industrials

188

High Technology

155
140

Consumer Products
110

Materials
Energy & Power

101

Media & Entertainment

99
75

Consumer Staples
53

Telecommunications
Healthcare

50

Retail

47

Government

1. Source: Thomson Reuters deal database, Accenture analysis

Notes: Total deal universe: All completed transactions during merger wave 20032009 conducted by
corporate acquirers with ultimate parent based in Europe
Deals excluded: deal value <0.5m ($0.5m), % owned after transaction 50%. Industries excluded:
financial services, real estate
Definition of serial acquirer: >3 deals in 20032009. Definition of occasional acquirer: 3 deals in 20032009

6 | Inside Corporate M&A

Not only are serial acquirers pursuing

more deals, they also tend to be
involved in larger deals (see Figure
3). Due to their wealth of experience
gained through numerous acquisitions,
serial acquirers exhibit more confidence
than occasional acquirers in tackling
ambitious projects, and are especially
likely to cast their line for bigger targets.
In fact, the average deal size in the
most recent merger wave for European
corporate serial acquirers equaled
more than 270 million ($380 million),
approximately 28 percent higher than
the average deal volume of transactions
closed by occasional acquirers.

Even more impressive, serial acquirers

have been adept at completing
cross-border acquisitions to tap
the extraordinary growth potential
of emerging markets: More than
half the BRIC transactions closed by
European companies were undertaken
by serial acquirers, and in relative
terms, serial acquirers closed 27
percent more deals than occasional
acquirers between 2003 and 2009 in
BRIC countries (see Figure 4). While
occasional acquirers were more likely
to conduct deals involving Russia (due
to the unique characteristics of the
Russian M&A market), serial acquirers
have a more diversified deal spectrum.

Figure 3. Average transaction value2

Deal Size
271m

+28%

212m

Occasional
acquirers

Serial
acquirers

Figure 4. Deals in BRIC countries by type of acquirer2

India

18%

17%

Brazil

17%

20%

China

17%

Russia

47%

24%

39%

Occasional acquirers

Serial acquirers

(44%)
332

(56%)
423

Number of
closed deals

+27%

2. Source: Thomson Reuters deal database, Accenture analysis

Notes: Total deal universe: All completed transactions during merger wave 20032009 conducted by
corporate acquirers with ultimate parent based in Europe
Deals excluded: deal value <0.5m ($0.5m), % owned after transaction 50%. Industries excluded:
financial services, real estate
Definition of serial acquirer: >3 deals in 20032009. Definition of occasional acquirer: 3 deals in 20032009

Challenges of Serial Acquirers

Being a serial acquirer offers some undeniable advantages.
For instance, serial acquirers are not reliant on one deal as
their big bet and, thus, can spread their M&A risks across
a portfolio of acquisitions. Additionally, over time serial
acquirers can strengthen their reputations in the M&A
market as reliable and professional market players, thus
originating deals more easily and gaining preferred buyer
status among those looking to sell.

They also can achieve economies

of scale and can afford to deploy
specialized M&A resources, both of
which make them better able to react
to opportunities quickly and complete
M&A projects more efficiently (thus
reducing overall project costs). Serial
acquirers also can benefit from
organizational learning to improve
their M&A performance over time,
thus turning their M&A experience
into a competitive advantage.
However, given the characteristics and
frequency of their deals, serial acquirers
also face some unique challenges,
including complexity. For instance, to
fuel their project pipeline, they must
focus on multiple deals simultaneously,
and manage a portfolio of projects
at all stages of the deal lifecycle. Our
research found serial acquirers have

8 | Inside Corporate M&A

an average M&A project closing rate

of just above 42 percent, which means
that to successfully close one deal,
they must start four M&A projects and
evaluate many more opportunities
simultaneously. In fact, 29 percent
of serial acquirers seriously evaluate
between 20 and 49 opportunities
annually, and 28 percent consider
more than 50 targets per year. And
with the average M&A project taking
approximately seven months to complete,
serial acquirers must always have
several projects under way to keep
their deal pipeline full. Due to their
greater willingness to take on targets
in emerging markets, serial acquirers
also are more likely to encounter
complexity related to regulatory
challenges, infrastructure obstacles,
and language and cultural barriers.

In addition to managing such complexity, as they continue to pursue new

deals serial acquirers must navigate
several organization risks. For instance,
they must be careful to avoid empire
building, a widespread phenomenon in
M&A. Doing so requires consistently
motivating managers to increase
shareholder wealth, not their own
power, sphere of influence and salary.
Serial acquirers also must be vigilant
about using their money wisely. Building
an M&A capability requires substantial
investments, and M&A experts can
become costly overhead if they are
not fully utilized (and may even burn
cash if they do not achieve a sufficient
closing and success rate). That said,
serial acquirers must avoid making
deals to appease deal makers or keep
their M&A experts busy, as opposed to
only conducting transactions that are
aligned with company strategy.

Another risk relates to organizational

knowledge. Given the number of deals
they complete, serial acquirers could
be expected to easily transfer their
knowledge and experience from deal
to deal. However, just the opposite can
be the case. Learning from acquisitions is
not easy, because it is not always clear
which actions or practices actually had
a positive impact on deal performance.
Every deal is different, and unless a
serial acquirer executes a critical mass
of different types of deals, its experience
in one deal is not necessarily
transferrable to others.

premiums, or taking on higher leverages

than is advisable. Conversely, as deals
become more routine, serial acquirers
risk becoming rigid, which manifests
itself in a less-careful approach, a low
level of management attention, or
inappropriate resource allocation.
In sum, serial acquirers certainly have
many leverage points that can help
them be more successful in M&A than
their less well-equipped competitors.
But there also are several potential
pitfalls, which serial acquirers must
identify and proactively manage to
avoid negative consequences.

Finally, M&A experience may lead to

managerial overconfidence. Energized
by previous successes, managers run
the risk of becoming overly ambitious
and tackling projects that are too
complex, overestimating synergy
potentials, paying exorbitant acquisition

M&A Processes

Figure 5. Reference process model for corporate M&A

M&A
Core
Processes

Strategy
Management

Transaction
Management

Integration
Management

Positioning
Strategic Planning
Screening & Selection
Justification

Deal Origination
Project Management
Due Diligence
Valuation
Negotiation

Integration Concept
Integration Management

M&A
Enabling
Processes

M&A Governance

Organization, Committees, Roles, Process

M&A Performance Management

Reporting, Reward Scheme, Auditing

Knowledge Management

Knowledge Retention, Knowledge Replication

As noted earlier, serial acquirers are

distinguished by both the higher
number and greater complexity of
deals they pursue and complete.
However, that is not their only
difference from occasional acquirers.
Our research found the way serial
acquirers pursue deals and the
capabilities they rely on to identify
and complete those deals also differ
substantially from companies for
which acquisitions tend to be episodic
and project oriented. Indeed, one could
say that unlike occasional acquirers,
serial acquirers have M&A in their
DNA, which enables them to attain
greater deal success overall.

10 | Inside Corporate M&A

For instance, occasional acquirers have

a traditional view of M&A as individual
projects to be managed with specific
approaches and temporary project
teams. By contrast, serial acquirers
consider M&A to be a repetitive and
more routine activity, driven by M&A
experts and distinct capabilities that
are embedded in specific M&A processes.
What do such M&A capabilities look
like? To find out, we conducted in-depth
interviews with 33 M&A directors from
some of the leading serial acquirers to
understand not only their M&A pain
points, but also what they considered
to be best practices in selecting and
executing M&A deals. Through our
research, we have identified six such
processesthree of which we deem core

M&A processes and three of which we

consider enabling M&A processes
which can be decomposed into 20
sub-processes as shown in Figure 5.

Core M&A processes

Core M&A processes follow the typical
cycle through which all deals must
progress, whether they are being
executed by an occasional or a serial
acquirer. However, serial acquirers
are notable in the different ways they
manage and use their core processes
to help execute multiple, often
concurrent, deals over time.
The objective of the Strategy
Management process is to link
deal making with corporate strategy.
This includes four process domains:

positioning in the M&A market;

strategic planning of M&A initiatives
and policy; screening and prioritizing
potential targets to determine the
right selection, sequence and timing
of acquisitions; and the actual
decision-making process. The key
for serial acquirers is to embed within
this process the ability to balance myriad
growth initiatives. For instance, while
an M&A roadmap provides guidance
for deciding the right quantity, selection
and timing of acquisitions, a serial
acquirer also must be flexible enough
to accommodate opportunities as they
arise. Doing so requires quick reactions
as well as rigorous evaluations.
M&A Transaction Management is
the process of turning a pipeline into
successfully closed deals. It comprises
five process domains: deal origination
focuses on turning a strategic M&A
roadmap into real projects; project
management throughout the entire
deal cycle; due diligence and valuation
of targets; and conducting appropriate
negotiations. Serial acquirers must
cultivate M&A Transaction Management
capabilities that enable them to secure
a constant deal flow and manage
multiple projects in parallel with
excellence and efficiency.
The third core process, M&A Integration
Management, delivers the deals value
potential and is made up of two process
domains: integration concept to plan
how the targets will be integrated, and
integration program management
to execute the integration plan. Serial
acquirers must have especially strong and
flexible M&A Integration Management
processes to ensure that multiple deals
do not interfere with each other and
are properly folded into the existing
organization. Such processes also must
help the organization plan the integration
and identify potential pitfalls and success

factors early, maintain momentum

throughout the entire deal cycle until
integration is completed successfully,
and prevent management attention
from being distracted by new
opportunities or deals.

Enabling M&A processes

While both occasional and serial
acquirers rely on these three core
M&A processes, serial acquirers also
possess supporting processes that
allow them to coordinate a portfolio
of M&A projects and systematically
increase the performance and reliability
of those initiatives. This is, arguably,
one of the major points of distinction
between the two groups.
The first of these supporting processes,
M&A Governance, is the foundation of
M&A as a business function. It defines
and provides for the staffing of a
formal M&A organization, establishes
committees to act as coordination
and decision-making bodies, and puts
guidelines and standards in place that
govern the M&A process and clarify
the roles and responsibilities of all
parties involved.

Finally, the M&A Knowledge Management

process encompasses retaining the
knowledge gained by M&A projects
and other initiatives in the form of
tools, templates, documentation
and databases; and replicating that
knowledge via lessons learned, training,
knowledge sharing and networking.
M&A Knowledge Management is a
key enabler to achieving economies
of scale and benefiting from
organizational learning.
The preceding six processes form the
core elements of a serial acquirers
approach to M&A and, as confirmed
by our empirical testing, are very
robust. And while the details generally
are customized for each company that
deploys them, Accentures research
reveals that overall these processes
are consistent across markets, M&A
strategies, and organizational structures.
In other words, serial acquirers actually
do share the same DNA.

M&A Performance Management is

the mechanism through which a serial
acquirer gains transparency into the
M&A deal and ensures compliance of
managerial behavior. This area includes
the reward schemes for business,
transaction and integration managers
during an M&A project; the standards
for project and portfolio reporting;
and the auditing process to evaluate
M&A performance. M&A Performance
Management is crucial to helping serial
acquirers avoid empire building and
managerial overconfidence, and to
keeping managers focused on the goals
and tasks at hand.

11

Accenture M&A Maturity Model

Figure 6. Stages of the Accenture M&A Maturity Model

M&A
Core
Processes

Strategy
Management

M&A
Enabling
Processes

M&A Governance

Transaction
Management

Integration
Management

M&A Performance Management

Knowledge Management

Maturity
Stages

Basic

Established

The Accenture M&A Maturity Model

is a comprehensive framework that
covers 20 M&A processes and 60 subprocesses, and that helps companies
evaluate and improve their M&A
capabilities. It contains a set of criteria,
key performance indicators, and
detailed process descriptions referring
to four maturity stages (basic, established,
advanced and high performance) that
represent the real-life M&A capability
spectrum, from typical pain points
to best practice. Using the Accenture
M&A Maturity Model, a company
can assess the maturity of each subprocess, rapidly find performance
gaps (either in absolute terms or in
comparison with established industry
benchmarks), and define appropriate
improvement initiatives to close
those gaps.

12 | Inside Corporate M&A

Advanced

High
Performance

A company can use the maturity

model to achieve a number of critical
benefits, including:
Identifying areas for improvement.

The model provides structure and a

comprehensive framework to assess
the current situation, stimulates
self-reflection and creative thinking,
and directs attention to important
issues.
Providing insights. Accentures

approach allows companies to

conduct analyses that are supported
by qualitative process benchmarks
of multiple peer groups (by industry,
country, size, and M&A frequency)
and key performance indicators.
Guiding decision making. The model

enables companies to easily establish

goals for their M&A capabilities
and prioritize the gaps to be closed
based on an exhaustive and objective
analysis grounded in a sound
methodology.

Facilitating improvement actions.

As a best-practice model, it provides

blueprints of what leading processes
should look like.
Supporting speed. Companies can

use the model to complete a maturity

assessment quickly and, thus, begin
addressing shortcomings immediately.
The Accenture M&A Maturity Model
draws upon intensive interviews with
33 M&A directors of some of the leading
serial acquirers. It has been developed
by Accenture, validated by an expert
panel, and statistically tested for
reliability. Furthermore, the relevance
of the model and the significant
impact of process maturity on M&A
performance are empirically proven.

13

M&A Fitness
For serial acquirers, the stakes of M&A
are undoubtedly high. But are serial
acquirers actually better acquirers?
To answer this question, Accenture
analyzed the fitness of serial acquirers based on benchmarking data on
110 serial acquirers gathered through
an online survey (see the Research
Methodology section at the end of
this study for more on this survey and
our overall research methodology).
We evaluated M&A performance with
multiple financial and nonfinancial
measures, and in terms of process, deal
and corporate performance.
Overall, our data contradict the
common belief that most transactions
destroy value. To the contrary, we
found that 65 percent of deals conducted
by serial acquirers achieved their
strategic goals and 61 percent met

their financial targets. In other words,

the approaches taken by serial acquirers
do create competitive advantage and
generate shareholder value. Nevertheless,
there is still a high risk of failure, as
47 percent of all serial acquirers failed
to break even with their M&A activities.
What distinguishes these poor
performers from the high performers?
Accenture discovered that the most
successful acquirers, perhaps surprisingly,
possess neither the deepest M&A
experience nor the most M&A experts
on staff. Furthermore, there is no
specific type of M&A strategy that is
superior to others. In fact, according
to Accentures research, the most
important distinguishing factor is the
strength or weakness of a companys
M&A capability (see Figure 7).

Figure 7. M&A performance and M&A capability

Deal performance
Strategic

success rate
success rate
Total financial impact
Financial

Process
performance

Corporate
performance4

Speed

Growth

Cost

Profitability

Quality

Shareholder

M&A
Performance3

value

R2=0,2137

M&A Capability3
(assessed with Accenture M&A Maturity Model)

3. Latent variable score, nominalized

4. Relative to peers

14 | Inside Corporate M&A

To arrive at this conclusion, we used

the Accenture M&A Maturity Model
to benchmark the M&A capabilities of
the serial acquirers in our large sample.
Indeed, our research provided ample
evidence that mature and sophisticated
M&A processes significantly increase
a companys fitness on all dimensions
of M&A performance: Serial acquirers
with an above-average M&A capability
clearly show better results in delivering
M&A projects on time, within budget
and at high-quality levels. They also
achieve excellence in execution and
can capitalize on economies of scale
and organizational learning, including
such things as streamlined processes,
structured collaboration and ready-touse knowledge bases. As a result, their
average project costs are 18 percent
lower than those of serial acquirers
with below-average M&A capabilities
(see Figure 8).

Accordingly, serial acquirers with

above-average M&A capabilities
execute a significantly higher number
of deals that meet their strategic
(71 percent versus 60 percent) and
financial targets (65 percent versus 57
percent), and achieve greater value via
acquisitions (see Figure 9). Additionally,
their processes increase the quality of
decisions and the effectiveness of M&A
management by protecting the company
from empire building, managerial
hubris, and a lack of management
attention to merger integration.

Figure 8. M&A process performance

Project efficiencies through on-time
and in-budget delivery

Figure 9. Acquisition performance

Percent of transactions successfully
reaching targets

However, while effectively completing

an individual deal is important, the real
measure of a deals success is its impact
on the companys overall financial
performance. Serial acquirers with
above-average M&A capabilities shine
here as well, outperforming their industry
competitors in terms of growth,
return on capital employed (ROCE),
and shareholder value (see Figure 10).

They also are better able to balance

external and internal growth, and they
use M&A to adapt their resources and
core competencies to the threats and
opportunities of a dynamic market.
As the preceding illustrates, a strong
M&A capability is the key driver of
success for serial acquirers, regardless
of their industry, market environment
or organizational context. This
importance only grows as M&A
strategies increasingly focus on a
larger volume of bigger, more complex
transactions and merger integrations.
Thus, investing in a high-performance
M&A capability clearly can pay off
handsomely for serial acquirers.

Figure 10. Corporate performance

Percent of companies that outperformed
their industry peers in terms of

10.6m
8.7m

71%

-18%

60%

67%

65%
47%

Transaction costs
( 2005-2009)

Strategic
targets

64%

57%

Financial
targets

Revenue
growth
(20052009)

52%
41%

ROCE
(2009)

45%

TRS
(20052009)

Serial acquirers with low M&A capability5 (below median)

Serial acquirers with high M&A capability6 (above median)

5. Based on an average deal volume of 242m between 2003-2009

6. Latent variable based on individual assessment of 60 M&A processes (basic, established, leading, high performance)

15

M&A Strengths and Weaknesses

Figure 11. Maturity and importance of M&A processes
0.6

Typical strengths
M&A Strategy
Management

0.5

Importance
(correlation
with M&A
performance)

M&A Transaction
Management
M&A Knowledge
Management

0.4

M&A
Governance

M&A Performance
Management
0.3

0.2

M&A Integration
Management

Typical weaknesses
Basic

Established

Advanced

High
Performance

Capability (average maturity score)

As the previous section revealed, many
of the serial acquirers Accenture has
studied have robust, mature M&A
capabilities that enable them to execute
deals more successfully and, ultimately,
enjoy better overall financial performance.
However, our research also found that
only very few serial acquirers have
consistently strong capabilities. In
fact, as a group, the serial acquirers
we studied have areas in which they
could improve, particularly in terms
of the capabilities related to merger
integration and the supporting M&A
processes (see Figure 11).

Typical strengths
Most serial acquirers are strongest in
the areas that matter the most. On
average, they are rated as advanced
according to the Accenture M&A
Maturity Model in M&A Governance,
M&A Strategy Management and M&A

16 | Inside Corporate M&A

Transaction Management. These are

not only the most traditional M&A
capabilities, but also are the most
important processes with the greatest
influence on M&A performance. In
other words, these processes can be
seen as must-haves: A company
lacking strong capabilities in these
processes likely will struggle to
complete deals effectively.

M&A Governance
Almost all serial acquirers have an
empowered and adequately staffed
M&A organization. Their M&A processes,
roles and responsibilities are well
defined and are effectively put into
practice. Nevertheless, often this is
only true for the actual deal making.
In contrast, our assessment found
serial acquirers governance of merger
integration to be only rudimentary.

M&A Strategy Management

Developing a sound M&A strategy is
the most important process for M&A
performance. Fortunately, most serial
acquirers have explicitly defined growth
initiatives, M&A objectives and deal
criteria. Most are also effective in
target screening, although their
approach often is more opportunistic
than proactive. Therefore, roughly half
of the companies studied by Accenture
struggle to plan their project pipeline
and develop an integrated M&A roadmap.

M&A Transaction Management

Serial acquirers M&A expertswho
very often have backgrounds in
investment banking, private equity
or M&A consultingknow their craft
and excel at running M&A projects,
conducting due diligence, evaluating
targets and negotiating deals. However,
there is room for improvement in deal

origination and in proactively building

relationships with potential targets to
position the company for future bids
should the target decide to sell.

Typical weaknesses
While they tend to be strong in these
traditional M&A processes, serial
acquirers are significantly weaker
in the supporting capabilities of
M&A Performance Management and
M&A Knowledge Management. They
also exhibit weaknesses in M&A
Integration Management, an area
that remains a major challenge for
virtually all companies (as numerous
past studies have indicated). M&A
Performance Management, M&A
Knowledge Management and M&A
Integration Management capabilities
have only an indirect influence on M&A
performance, as they cannot turn bad
deals into good ones. However, they
are nonetheless crucial to realizing
a deals value potential and
systematically improving a companys
M&A performance over time.

M&A Performance Management

In many companies there are legendary
stories about high-profile, blockbuster
acquisitions, as well as managers who
have attained hero status via M&A
and have cultivated an aura of mystery
and awe around themselves. However,
just as often such companies have
scant transparencyand sometimes
even secrecyregarding actual deal
performance. Furthermore, while most
serial acquirers have proper reporting
procedures in place, they may struggle
to establish effective reward schemes
and, even worse, often lack a formal
auditing process to reveal how well a
deal worked, and why it was or was
not successful. For instance, only 29
percent of serial acquirers we studied
have the right metrics in place to
assess the overall effectiveness of
their M&A function, and thus are able
to compare M&A value creation with
its costs.

M&A Knowledge Management

As highlighted earlier, serial acquirers
often do not capitalize on the wealth
of their experience. With Knowledge
Management being the most
rudimentary M&A process, and
lessons learned or postmortem
analyses often neglected, it is not
surprising that companies learn so
little. More than half of serial acquirers
have only a fragmented and very
simple toolset (55 percent) or do not
maintain a knowledge database (59
percent). Accordingly, at best these
companies are forced to reinvent
the wheel often, and at worst, their
deals are sabotaged by their failure
to learn from past mistakes. Codifying
knowledge is made more difficult by
the fact that M&A staff turns over
frequentlyour research indicates the
average tenure of M&A experts is just
3.5 yearsand because less than 20
percent of serial acquirers invest in
training programs or knowledge sharing
to enhance their knowledge base and
improve the execution of future deals.

individual capabilities of the integration

manager. Indeed, only rarely do
companies have a repeatable and
reliable approach to merger integration
in place.
The message from these findings is
clear: To enhance their chances for
M&A success, serial acquirers must
build on their existing strengths in core
M&A processes while working to close
the gaps between their supporting
M&A processes and best practices.

M&A Integration Management

In most companies, the M&A team is
focused on getting a deal done and is
released from its project responsibilities
when the deal has closed. From
that point forward, responsibility
for integration typically is assigned
to the business units. Unfortunately,
such units often lack experience in
M&A Integration Management and,
worse, are poorly prepared to handle
it because they lack proper guidance.
Indeed, Accentures research found
that 69 percent of serial acquirers
have no M&A playbook or similar
documentation to guide merger
integration. In addition, business
units often struggle to balance business
and project demands and are unable to
staff integration projects with the right
level of resources and skills. Therefore,
the quality of integration program
management can be quite volatile,
and often is heavily dependent on the

17

Ideas for Improvement

With success in M&A hinging on the maturity of a companys
M&A capabilities, the logical question to ask is this: Where
and how to begin strengthening those processes that can
have a major impact on whether or not M&A deals achieve
their targets? In fact, Accenture has identified seven areas
on which companies can focus to boost the maturity of
their M&A capabilities.

Plan the M&A roadmap

Linking M&A to corporate strategy
requires companies to identify and
compare their options. In particular,
companies that follow an opportunistic
approach to M&A require factors
against which they can evaluate every
opportunity. Such a system of sound
criteria should include a mission
statement, deal preferences, hurdle
rates and knockout criteria to
identify the most attractive targets
and quickly filter out less promising
deals. Our data show that an M&A
roadmap based on a realistic understanding of various M&A scenarios
and the companys capabilities is key
to balancing organic and M&A growth
initiatives, prioritizing opportunities,
and finding the right timing for
acquisitions (see Figure 12). To close
the common gap between planning

18 | Inside Corporate M&A

and execution, this M&A roadmap

should be substantiated with a detailed
and binding action plan, with metrics,
due dates, and responsibilities for
developing the defined M&A initiatives.
Importantly, top management should
be committed to providing the required
support and resources for implementing
the roadmap.

of merger integration. Another key is

ensuring that the person who will be
in charge of downstream integration
is appointed and involved at the
very outset of the M&A project (see
Figure 13). This persons roles and
responsibilities should be defined early,
and they should become an integral
part of the deal team.

Provide direction and

end-to-end governance

Accenture also has found that providing

clear directions for all stages of the
deal is crucial to project success.
Such directions should include quality
standards for strategic evaluation
and internal decision papers, financial
guidelines and standardized approaches,
conceptual blueprints, and non-negotiable
actions for merger integration.

Given the magnitude and complexity

of M&A, companies must be able to
ensure M&A projects are consistently
well-managed. There are several keys
to doing so, including the creation
of end-to-end M&A guidelines and
process descriptions that also define
roles, responsibilities, key milestones
and deliverables throughout the entire
deal cycle, especially in consideration

Figure 12. Common vs. best practices

for strategic planning

Figure 13. Common vs. best practices

for nomination of PMI manager

No mid-term M&A roadplanning

map (including
of M&A
forecast and
projects
action plan)

79%

73%

71%
54%

Figure 14. Common vs. best practices

for reward schemes

58%

Shortly before At beginning

or after
of M&A
signing
project

54%

No M&A M&A reflected

targets for in targets of
business
business
owner
owner

Process maturity rated as basic or established

Process maturity rated as high performance
Note: % = percent of transactions that delivered financial targets

Pay attention to incentives

and rewards
Many serial acquirers are reluctant
to define quantitative objectives and
incentives for the actual M&A team, as
doing so can be difficult to implement,
and might bias the rigor of due diligence
and valuations. However, targets and
rewards for another group, the line
managers responsible for the acquiring
business units, are critically important
(see Figure 14). In fact, they are some
of the biggest levers for M&A success.
Such incentives should encourage
business managers to drive the deal
pipeline forward according to the
companys agreed-upon M&A roadmap.
In addition, business managers targets
must be value-oriented to make
successful integration a top priority.

Companies also should have performance

management standards in place for
integration managers, as well as
monetary incentives that are directly
linked to the delivery of value targets.
Importantly, such standards and
incentives must not conflict with
or take precedence over those related
to the regular jobs of the people
assigned to guiding the integration,
to avoid disrupting the daily operation
of the company.

19

Figure 15. Common vs. best practices

for skill development

Figure 16. Common vs. best practices

for lessons learned

75%

67%

60%

Learningon-the-job
approach

56%

Frequent and
systematic
training

No or
Frequent and
irregular
systematic
lessons learned lessons learned
sessions
sessions

Figure 17. Common vs. best practices

for PMI competence center
72%
59%

PMI projects PMI projects

staffed by staffed by/with
business unit PMI experts

Process maturity rated as basic or established

Process maturity rated as high performance
Note: % = percent of transactions that delivered financial targets

Develop M&A skills across

the entire organization
To keep its M&A skills as strong as
possibleand ensure that these skills
become embedded in the DNA of the
company at largecompanies should
conduct frequent training of not
only M&A specialists, but also of
management and business experts
(see Figure 15). Furthermore, companies
should conduct proactive coaching of
project members by experienced M&A
specialists, and provide tools that can
help M&A teams find help and guidance
when they need it. For example,
companies can officially nominate
M&A contact people in all corporate
functions, create knowledge maps, or
establish an electronic expert directory.
Maintaining a cross-functional M&A
community of practice also can further
the understanding and knowledge

20 | Inside Corporate M&A

of M&A across the business. Finally,

frequent knowledge exchange with
external experts and participation in
related associations and conferences
are important to staying up-to-date
and gaining new ideas and insights.

Learn from experience

As mentioned earlier, most companies
fail to learn from their M&A efforts
and, thus, are at risk of repeating past
mistakes and overlooking opportunities
to excel. So, they should take the time
to conduct regular, structured lessons
learned sessions for both successful
and unsuccessful projects (see Figure
16). The results of these sessions
should be shared widely around the
company. These lessons, as well as
end-to-end project documentation
and all other M&A assets, should
be archived in an easily accessible

knowledge repository so they can be

consulted by future project teams.
Importantly, project postmortems should
generate a list of action items to
improve identified shortcomings, and
should provide a means for tracking
how these improvements are made.

Organize for postmerger integration

Given the struggles companies continue
to have in merger integration, many
should be paying considerable attention
to strengthening their capabilities in
post-merger integration (PMI). One
way to do so is to appoint a party
responsible for post-merger integration
that can provide the required expertise
(see Figure 17). The few companies
that have founded such a dedicated
PMI competence center have achieved
remarkable success rates. Admittedly,

Figure 18. Common vs. best practices

for deal reviews
77%
58%

Infrequent
performance
reviews

Frequent and
systematic
deal reviews

Process maturity rated as basic or

established
Process maturity rated as high
performance
Note: % = percent of transactions that delivered
financial targets

creating and operating such a center

might be difficult for organizations
that do not frequently acquire (and,
thus, do not need the capability on a
regular basis). In these cases, companies should, at the very least, appoint
a manager who is fully dedicated to
leading the integration phase of the
dealand they should widely promote
this position as an excellent career
opportunity. Furthermore, project
teams that are not staffed with PMI
experts require guidance and support,
including such essentials as a detailed
PMI playbook and a repository of
helpful job aids, templates and
real-life work examples.

Establish a rigorous
auditing process
To fully understand its M&A track
record, a company should establish
a standard review approach and a
mandatory audit plan with continuous
monitoring, rather than ad-hoc audits
(see Figure 18). This approach should
include a strategic review (rationale
and achievements), a financial
review (performance, valuation,
and assumptions), an operational
review (operating performance and
issues) and a project management
review (budget, time, risks, etc.). The
evaluation criteria should be clear in
advance, the reviews should be done
by an independent auditor, and the
results should be reported to top
management or the M&A committee.

From time to time, a company

also should assess the long-term
performance of its previous acquisitions.
Such assessmentsin combination
with a meta-analysis of lessons
learned and a review of processes
and standardsare key to evaluating
the overall effectiveness of the M&A
function and determining the need to
further develop the M&A capability.

21

22 | Inside Corporate M&A

Conclusion

We can observe that the vast majority

of serial acquirers understand the
significance of their M&A capabilities
and have strong foundations. Such
companies also often have a team of
experts following established processes
to prepare and process successful deals.
However, there are others that master
M&A with even more consistent and
repeatable success. What is their
formula, and how can other companies
reach their level of performance? Most
players do not require fundamental
restructuring, but instead need to
actively work on their M&A capability.
The findings of Accentures research
clearly show that these capabilities do
not evolve automatically with experience.

Serial acquirers should regularly check

on their internal M&A capability and
know their individual strengths and
weaknesses. With high priority on the
elements that have the greatest impact
on M&A success, they should use a mix
of focused engineering activities and
continuous improvements to achieve
process excellence. To close the gap
between itself and the fittest, any M&A
player should also strive for improvements
and ultimately excellence in all elements
of the corporate M&A processes. The
rewards for these efforts are clear:
High-performance serial acquirers are
more successful deal makers, drive
more value out of their deals and,
most importantly, deliver better
corporate performance.

23

Research Methodology
Accenture put the most active acquirers
under the microscope, analyzed the
DNA of their M&A capabilities, and
developed a formula to assess the
processes and methods required to
successfully implement an M&A
strategy. This effort involved both
qualitative and quantitative research,
as well as empirical analysis.

Qualitative research
Between May and July 2010, Accenture
conducted in-depth interviews with 33
M&A directors at leading serial acquirers.
The interviewswhich averaged 90
minutes in length and yielded more
than 50 hours of materialwere
conducted as semi-structured
conversations designed to identify
executives pain points and best
practices related to M&A.

24 | Inside Corporate M&A

The results of our interviewscombined

with a complementary meta-analysis
of the existing literature on serial
acquirers, Accentures intellectual
property, and our extensive experience
working with companies on more than
650 M&A deals during the past five
yearsformed the basis of the Accenture
M&A Maturity Model. The model has
been developed iteratively, with input
from a panel of six selected corporate
M&A directors and experts, and has
been validated by focus group workshops. The model also was tested by 10
consultants for comprehensiveness and
logical rigor.

Quantitative research
In addition to speaking directly with
M&A directors, Accenture undertook
a comprehensive study of all M&A
transactions by European acquirers
between 2003 and 2009 (based on
Thomson Reuters data). We filtered
out financial investors and deals with
a transaction volume less than 0.5
million, and identified 1,019 companies
that have engaged in more than three
acquisitions. We dubbed these companies
serial acquirers.

We then invited 480 of these serial

acquirers to participate in an online
survey designed to benchmark their
M&A capabilities between October
and November 2010. The final sample
consists of 110 companies from 20
European countries, equaling a response
rate of 22.3 percent. Collectively, these
participants have been involved in
more than 2,500 M&A deals between
2007 and 2009 and represent a
cross-section of industries, sizes and
acquisition strategies (see Figure 19).
Statistical tests confirmed the sample
was representative and unbiased.
The result of the survey is the most
extensive M&A benchmarking to
date, comprising 150 quantitative
and qualitative benchmarks and more
than 17,000 data points.

Figure 19. Overview of Peer Group (n=110)

Empirical analysis

in terms of growth, ROCE and

shareholder value compared with
industry peers. We have controlled
the model for different market
environments, M&A strategies and
organizational contexts.

The Accenture M&A Maturity Model

and the influence of an M&A capability
on M&A performance have been
analyzed using a structural equation
model. M&A capability was specified
as an unobserved latent variable. It
was determined based on the maturity
scores of the different M&A processes
as observed variables using a multivariate factor analysis. M&A performance
was specified as a multidimensional
construct based on subjective
assessments: Process performance
was measured by the satisfaction
level with various process results (e.g.,
speed, cost or quality). Deal performance
was measured by strategic and financial
success rates and total M&A contribution
to ROCE and shareholder value.
Corporate performance was assessed

Companies by size
Sales volume 2009 in bn

Companies by deal frequency

Total # of deals in 2007-2009

<0.25

<3 deals

0.25 < 0.50

0.5 < 1.0

7
4
12

1.0 < 5.0

40

>5.0
No answer

33
14

13

3 < 10 deals

27

10 < 20 deals

28

20 < 50 deals
>50 deals
No answer

22
11
9

Statistical tests proved the model to

be robust and reliable. The influence
on M&A performance and the paths
of all elements of the Accenture M&A
Maturity Model are significant at the
1 percent level.
The authors would like to thank all the
experts who participated in our research
interviews, the members of the panel
who advised the research, and all
participants in the M&A benchmarking
analysis for their valuable contributions.

25

About the Authors

Mirko Dier is an executive partner

and leads Accentures Global M&A
and Merger Integration practice. Dier
joined Accenture in 1995 and works
with leading clients particularly in
the Resources industry with a focus
on corporate strategy, M&A, merger
integration and business transformation.
He holds a masters degree in business
administration and an executive master
of business administration degree
from Kellogg. He is based in Munich.
mirko.dier@accenture.com
Moritz Kbel is a manager in Accentures
Global Strategy practice and leads the
research initiative Inside Corporate
M&A. He has more than nine years
of experience in strategy consulting and
was responsible for several international
M&A engagements in the energy,
utilities, metals and industrial

26 | Inside Corporate M&A

equipment industries. Kbel holds a

masters degree in business administration
and wrote a Ph.D. thesis on serial
acquirers at the Friedrich-AlexanderUniversity of Nuremberg. He is based
in Munich.
moritz.kubel@accenture.com
Artur Meinzolt is a senior manager in
Accentures Global Strategy practice with
a specialization in M&A. During more
than 11 years of a career in management
consulting he advised clients on more
than 40 deals internationally (buy side
and sell side). His primary industry
focus is telecommunications, high
tech and renewable energies. He holds
masters degrees in communications
and business administration and is
based in London.
artur.meinzolt@accenture.com

Hans Langthaler is a Munich-based

consultant in Accentures Global
Strategy practice with several years
of experience in international M&A
undertakings. During his career he
has worked primarily in the oil & gas,
utilities and real estate industries on
pre-deal engagements. He holds a
Ph.D. in resources management.
hans.langthaler@accenture.com

27

About Accenture
Accenture is a global management
consulting, technology services
and outsourcing company, with
more than 223,000 people serving
clients in more than 120 countries.
Combining unparalleled experience,
comprehensive capabilities across all
industries and business functions,
and extensive research on the worlds
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. The company
generated net revenues of US$21.6
billion for the fiscal year ended
Aug. 31, 2010. Its home page is
www.accenture.com.

Copyright 2011 Accenture

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are trademarks of Accenture.
This document is produced by Accenture as
general information on the subject. It is not
intended to provide advice on your specific
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contact your Accenture representative.