Mega deals are back and more are in the pipeline, reports Ben Tye, Head of Energ ...

Mega deals are back and more are in the pipeline, reports Ben Tye, Head of Energy Practice at project management consultancy PIPC. And there is a surprising trend - the rise of the nil-premium, all-stock deal. According to Thomson Reuters, stock-only deals will account for 30% of worldwide mergers and acquisitions (M&A) this year, up from 7.9% at the height of the 2007 debt boom. Recent activity has included the $25.5bn Duke Energy and Progress Energy deal, the $4.5bn Lundin Mining/Inmet Mining merger, the $10bn NYSE Deutche Borse deal and the LSE/TMX merger, worth $6bn.
With bankers still unwilling to lend, the all-share deal seems like a win-win situation, according to Tye. However, this type of deal is always about cutting costs to create value, which is harder than it seems, he says. ‘Success is about minimising risk and this means planning. The best planning starts when the board decides it wants to expand and what the ideal target is - clarity here will make the process infinitely more likely to succeed. Once the target is identified, start due diligence. Nothing should be assumed, every detail must be checked and finding the gremlins at this point will save money later,’ Tye explains. ‘Once a deal is accepted, draw up detailed plans for integration, fully costed and resourced with someone in charge. This person is often a consultant, an experienced independent whose only vested interest is making the deal work’.
PIPC suggests the following five principles of integration:
Neglect is so often the root cause of integration failures, resulting in falling revenue as clients defect to the competition. Keep sales teams motivated and clients informed - and monitor KPIs (key performance indicators) closely. Address problems immediately.
Integration must be the priority and should only be eclipsed by keeping the show on the road or mandatory imposed change. This is not the time for fixing every operational issue.
Trying to create an integration plan that answers all the questions before execution will just result in delays and prolonged debate. Events will occur that you will never predict and success will come down to how the organisation navigates these points of pain.
Whoever is in charge must be accountable and have direct access to the board. Managing a successful integration is not a part-time activity nor is it for the uninitiated.
Post-acquisition is the time to be loud and proud, increasing the frequency of updates to clients and staff; ensuring key third-parties know their roles; and keeping the media and analysts on side. Constantly communicate the logic of the acquisition, the integration plan and its progress.