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International Annual Review 2012

The KPMG International Annual Review focuses on our record of achievement and those who define us as an organization: clients, people and communities.

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Details

Type: White paper
Date: 9/15/2011

Lessons learned

When it comes to M&A in the FS, old issues with poor communication and lack of attention to cultural differences still persist. Real value can be gained from solving these problems.

Our long-term analysis of the factors behind successful M&A deals, now combined with comments on recent activity from our experts, has highlighted some common issues relating to the mergers and post-merger integrations in the FS sector. We’ve summarized them here.

"It needs to be clear to your internal team, and to the market, that your first priority is not to lose any customers. If CEOs shy away from talking about their plans in detail, or it's not clear what they plan to do, then that in itself runs the risk of leading customers to go elsewhere."

– Tiberius Vadan, Senior Director, KPMG in the US

1. Do your due diligence

Our research shows FS companies do less due diligence than the global average. When due diligence is thorough, integration can be simple. With the proper framework put in place at the onset, integration can be relatively quick. But without proper planning, integration is likely to be slow and problematic.

2. You can't pay too much attention to revenue synergies

Our research indicates that, when it comes to the benefits of a merger, FS companies normally pay more attention to cost-cutting-related synergies than they do to assessing revenue-related synergies. This can lead to the undervaluing and even the eventual collapse of a transaction.

3. Communicate confidently, openly – and often – with the market

It is possible to persuade investors of the value of your revenue predictions – provided your arguments are strong enough. The markets will need to hear a good explanation of how your post-merger revenue growth assumptions will be realized – and your CEO will need to be able to answer fundamental questions well.

4. Track and measure progress

FS executives appear reluctant to check on the promises and assumptions that formed a key part of the negotiations, to see if they were delivered.

Nevertheless, our research highlights a positive correlation between the success of a deal and an organization's ability and will to effectively track revenue and cost synergies once the deal was complete.

5. Cultural integration is a critical success factor

The ability to achieve effective cultural realignment – to culturally integrate two organizations well – also remains a critical success factor, especially when it comes to a merger of equals. Some of the FS organizations we surveyed had spent 12 to 18 months building relationships with their merger partner to create mutual trust and buy in.

There are effective diagnostic tools that can help to pinpoint and deal with potential cultural clashes. These are gaining increasing acceptance in the FS sector.

Get in touch with KPMG

Learn more

To learn more, download the full report, contact your local KPMG member firm or email banking@kpmg.com to talk with one of our FS M&A experts.

The architecture of integration articles:

The architecture of integration case studies:

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