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The post-acquisition costs since that deal was announced have allegedly reached over an additional $50 billion. Because the post-acquisition strategy has not been considered up to this stage, the value of acquiring the target is not fully understood resulting in bad pricing. Equally a lack of rigorous integration thinking results in the wrong deal structure e.g. the acquirer intends to fully integrate all departments into their organization making an earn-out deal structure linked to profits performance impractical. The target staff are not involved in departmental integration projects resulting in little or no buy-in to the success of the deal Deal objectives and success criteria are never defined.

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The article was valuable for entrepreneurs because it brought together some key statistics you should be aware of, and I’ve added a few more to add value and context. In the US last year there were just under 10,00 deals valued at under $2 billion (of which 7800 where terms were not disclosed). The # of private companies owned by PE firms has jumped from below 2000 in 2000 to around 7800 today. Reach out to hear how our partners have been working inside businesses as operators for over 30 years to create businesses that have exited for premium valuations.

Look behind a weak acquirer’s M&A activity and you will see a lack of process protocols, a lack of post-mortems on major projects. They show this lack of skill throughout the deal process, over pay to get the deal done but fail miserably to successfully integrate a target they don’t really understand. I say, how dare an acquirer foist their lack of operation skills on a poor suspecting target (Ok the owners of the target probably do quite well) but the acquisitions are invariably a failure. My own research suggests that larger transactions reported by the big investment banks in the US shows that around 6000 private companies or parts of larger groups sold out for $10m or more.