AI Issue 5 2018

Acquisition International - Issue 5 2018 5 But they should only take a moment. Closing the deal isn’t the end of the process. Only when two organisations are functioning as one and the anticipated benefits are visible in the real world can the deal really be thought of as completed. Sadly, that outcome is much less frequent than it should be. Indeed one Accenture report has noted that just 58% of all acquisitions added shareholder value 24 months past close. While that report celebrated this fact, we believe businesses should, and can, do better. We’ve looked in detail at what makes M&A deals succeed and fail, and our report, Inconvenient Truths, describes ten leadership behaviours which are crucial to the final outcome. Two earlier articles have looked at pre-deal behaviours, and now we will focus on the four post- deal actions that CEOs and other leaders should take if they want to raise their M&A success rate. 1. Follow M&A best practice. This might sound like a statement of the blindingly obvious, but it is surprising how many business leaders understand M&A best practice yet fail to implement it. For example, in our research for Inconvenient Truths we found that more than 80% of business leaders believe formal programme structures and dedicated resources to deliver integration alongside day- to-day business has a major impact on long term success. But fewer than 10% of these same leaders always follow their own advice. For M&A to succeed, businesses need to get serious about practicing what they preach. 2. Lookpastprocessandtowardstransformation. Achieving the goals set out pre-deal requires more than just following a prescribed integration process. It is about transforming what were separate organisations into something entirely different. New co-workers, new processes, possibly a new work location, and buy-in to a new set of values aren’t achievable overnight. Intellectually leaders understand this, but they may not appreciate how important they are to ultimate deal success, how much energy is required from them, and quite how much they need to lead – and be seen to lead. Some, especially in middle management, may understand all this, but simply aren’t equipped with the right skills or knowledge of how to lead people through the transformation. Leaders are generally good at being present and inspirational on Day 1, but their visibility can fade as time goes on. There will be peaks and troughs throughout the integration period, which could last for a couple of years, and it is vital that leaders are seen to be active through the bad times as well as the good. 3. Keep interest levels up throughout integration. It is not unusual for leaders to lose interest after Dine Brands Global, Inc. recently announced the appointment of Thomas Song as Chief Financial Officer, effective May 29, 2018. On the 7th May, Dine Brands Global, Inc., the parent company of Applebee’s Neighborhood Grill & Bar ® and IHOP ® restaurants, announced the appointment of Thomas Song as Chief Financial Officer, effective May 29, 2018. “Back in February, we outlined our plans for a complete strategic transformation of Dine Brands to return it back to a growth company. Our approach includes strengthening the leadership team and making strategic and meaningful investments. After a comprehensive nationwide search, during which we identified and evaluated a number of highly-qualified candidates, Tom emerged as the clear choice to become our next chief financial officer. Tom has a unique and varied background that includes over 20 years of experience in finance, M&A, development and franchising, delivering strong business results and creating significant value for shareholders,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc. Mr. Joyce continued, “Having worked with Tom directly, I know what a gifted, results-driven leader he is and also value his skills as an excellent leader of people and team culture. I am excited about his joining the team and looking forward to having his ideal combination of skills, knowledge and experience in place as we execute our strategy for long-term growth.” Mr. Song serves as the Senior Vice President of Corporate Development and Innovation of Choice Hotels International, Inc., one of the world’s leading hotelcompanies,apositionhehasheldsince2013. In that role, Mr. Song led Choice Hotels’ strategic growth initiatives, including corporate investment and acquisitions. Prior to Choice Hotels, Mr. Song served as the Head of Corporate Development and Strategy for the Hanover Insurance Group where he was instrumental in executing the strategy for business portfolio management and optimisation. Earlier in his career, Mr. Song held positions in management consulting and investment banking. Mr. Song graduated from the University of Chicago and earned his MBA from the J.L. Kellogg Graduate School of Management at Northwestern University. Greggory H. Kalvin, the company’s interim Chief Financial Officer, will continue in his role as Senior Vice President, Corporate Controller once Mr. Song joins the company. “I want to sincerely thank Gregg for his contributions and dedication as our interim chief financial officer during this transitional time for the company. He has been a fantastic partner and will continue to be an important and valued part of the company’s go-forward strategy in his role as Senior Vice President, Corporate Controller,” commented Mr. Joyce. Dine Brands Global, Inc. Appoints Thomas Song as Chief Financial Officer NEWS / From Around The World a deal is done. In our research for Inconvenient Truths, half of respondents told us that senior executives don’t provide the right level of attention and focus during the post-close period. Yet post-deal challenges and ‘heavy lifting’ often only tend to show up four to six months after ‘Day 1’, and benefits typically don’t start showing till nine to twelve months after. Senior leaders don’t necessarily have the time or inclination to push forwards on the detail. They are often ‘bigger picture’ people, and once a deal is closed, they may well be looking forward to the next big thing, expecting others to focus on the integration work. But they have a responsibility to recognise their importance, and ensure they are also able to focus on integration. Not doing so could have a serious negative effect: 77% of respondents to our survey said senior executive attention and focus post-close has a major impact on long term deal success. 4. Learn from past deals, and apply that learning. It is a surprising fact that businesses are generally not very good at learning from the experience of past deals. There are many contributory factors but to focus on one ‘quick win’, we found that 54% of acquirers don’t regularly conduct formal reviews to measure M&A success and learn lessons, and this must surely have an impact. Meanwhile, if there are a few years between acquisitions it is entirely possible that some key players will have moved up or moved on, taking their experience with them and away from the deal coalface. In highly competitive environments where more frequent M&A is the norm, the pressure to get on with the next deal can preclude spending time learning from the last one. Our years of experience in the field tells us that the organisations which are best at learning from past deals are those which are good at knowledge management more generally. Their predisposition to capture, codify and share information across many aspects of the business is transferred to M&A rather than being specific to it, and because the techniques used are part of the way the organisation functions and its culture, leaders embrace them as a matter of course. Our research found that 47% of businesses don’t believe M&A consistently delivers long- term benefits. That’s a shockingly high figure for something which is, for many businesses, a ‘bread and butter’ activity – something that’s regular and normalised. By being mindful of these four post-deal behaviours leaders can take steps to help ensure their deals deliver on the aspirations that drove their M&A activity, and push that figure down significantly.