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 / Spring 2006 / Issue 42(originally published by Booz & Company)


Mergers: Back to “Happily Ever After”

The economic rewards of planning early were aptly demonstrated recently by a global telecommunication services company’s $1 billion acquisition of a U.K. fixed-line operator. Shortly after the initial due diligence was completed, a management team analyzed the deal more closely and identified three to five times more potential gains than the companies had initially found. By balancing these newly discovered opportunities with existing cost-reduction goals, the companies were able to more effectively determine the resources and integration requirements needed to capture the most substantial benefits from the acquisition.

The fact that the track record for mergers is improving suggests not only that these deals will continue to play a major role in the growth strategies of many companies, but that they should. After companies reach a significant size and level of maturity, they need to consider acquisitions if they want to continue to deliver shareholder value. Indeed, multiple studies confirm that acquisitive companies outperform their less aggressive peers.

Some of these acquisitions are going to have to go beyond mere consolidation to tap new strategic possibilities. However, that needn’t be cause for alarm. As recent mergers increasingly have shown, if the transaction makes business sense for both companies, has the backing of stakeholders, and is diligently planned-for well before it is finalized, it is reasonable, for the first time in many years, to expect success.

Author Profile:

Gerald Adolph ([email protected]) is a senior vice president with Booz Allen Hamilton in New York. He specializes in mergers and major restructurings.
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