Mckinsey: Eight basic beliefs about capturing value in a merger

 To maximize deal value in a merger, focus on critical principles.

 
«Show me the money!» That demand, heard throughout Jerry Maguire, could provide the rallying cry for most mergers. But maximizing deal value requires more than repeating a catchy slogan. It requires embracing eight basic beliefs. In this article, we lay them out and offer key takeaways for each one.

 
Due diligence is not the be-all and end-all foundation to maximize value

At the start of a typical integration effort, the integration team uses the deal model and due-diligence results to identify opportunities and set synergy targets. But financial due diligence is seldom deep or exhaustive enough to provide a solid foundation for maximizing value because the effort focuses on justifying the deal, not on creating value (in other words, “figure out what to pay for the asset versus what to do with the asset”). Additionally, diligence proceeds quickly, with limited access to target information, and management bias toward the deal can skew diligence results.

Studies have shown that opening the aperture—or looking for new sources of synergies and value beyond the value that justified the deal—can increase synergies by 30 to 150 percent above due-diligence estimates. Our survey showed that due diligence often ignores as much as 50 percent of potential merger value because it does not take full transformational synergies into account.1 Survey respondents admitted that more than 40 percent of their deals suffer from inadequate due diligence, and they emphasized that companies need to think beyond due diligence if they want to capture truly transformational value.

Key takeaway: Open the aperture to maximize integration value.

Eight basic beliefs about  capturing value in a merger

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