The successful companies targeted synergy benefits through increased revenue and a reduction in operational costs. Also vital, says KPMG, were the softer issues - the selection of the right management team, resolving cultural issues and communications. The message from numerous other research reports is that people matter. Unless key stakeholders are informed during the merger process they may not buy into the deal and the merger may be derailed. A new trend is for companies to use management assessment techniques in the pre-deal period to identify individuals who will be critical to the success of the merged business.
Many deals fall apart after the due-diligence process.
This was the case for privately owned IQ Business Group, which called off its R1,4bn deal with JSE-listed Spicer in February. IQ's due diligence found that Spicer's customer relationship management division was nowhere near meeting forecasts and had fallen into losses. The final nail in the coffin was when fraud was uncovered in Spicer's UK subsidiary. We wanted to merge to create critical mass. The market got wind of the problems, Spicer's share price started collapsing, its people started leaving and the strategic reason to do the merger was no longer there, says Roets.