Ground-breaking global research by KPMG International, which found that 83% of corporate mergers and acquisitions (M&A) fail to enhance shareholder value, has identified six "key" activities that make a deal successful. In the report, Unlocking shareholder value: the keys to success, KPMG analyzed the 700 most expensive international deals from 1996 to 1998, and interviewed 107 executives from those companies.
"More than 8 in 10 deals fail to enhance shareholder value because of poor planning or execution or both, yet, by contrast, most of the executives interviewed (82%) believed their deals were successful," said Donald C. Spitzer, the U.S. national partner in charge of the Global Financial StrategiesSM practice of KPMG LLP, the U.S. accounting, tax and consulting firm. "This is an extraordinary finding, and noteworthy because transactions remain the most dynamic driver for growth among corporate executives." KPMG estimates that a record $2.2 trillion in global M&A activity will be recorded in 1999.
Interviews with executives identified a combination of six "keys" -- three hard keys and three soft keys -- that were necessary for a deal to succeed, according to Spitzer.
KPMG identified the three "hard keys" -- pre-deal business activities that had a tangible impact on the ability to deliver financial benefits -- as:
Among the major findings pertaining to "hard keys" (the business activities), the research showed that companies which put priority on:
In terms of "soft keys" (the people issues), companies that placed priority on:
In order to arrive at the average by which success or failure of improved shareholder value was compared, researchers identified a pre-deal trend in a company's equity price and used the performance in the relevant industry segment to plot the company's expected price trend for a year after the deal was closed. Researchers then compared the actual company performance with the average to determine success or failure of enhancing shareholder value. Firms that showed neither an improvement nor a decrease in shareholder value received the benefit of the doubt, and counted as successes. Ninety-seven of the interviews were conducted with executives of companies in North America, the United Kingdom and continental Europe. The other 10 were conducted with executives from elsewhere in the world.
KPMG International is a network of member firms with global capabilities.
KPMG LLP is the U.S. member firm of KPMG International. In the U.S., KPMG partners and professionals provide a wide range of accounting, tax and consulting services. As a provider of information-based services, KPMG delivers understandable business advice -- helping clients analyze their businesses with true clarity, raise their level of performance, achieve growth and enhance shareholder value. KPMG International's member firms have more than 100,000 professionals, including 6,800 partners, in 160 countries. KPMG's Web site is http://www.us.kpmg.com.
KPMG Peat Marwick LLC, 2001 M Street NW, Washington, DC 20036. Tel: 202-739-8349; Fax: 202-293-5457.