Post-Deal Integration & Synergy Capture As multiples include - - PowerPoint PPT Presentation

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Mar 24, 2024 37 likes •139 views

Post-Deal Integration & Synergy Capture As multiples include synergy potential, cracking the code to successful integration & synergy capture becomes even more important Thomas Fossum Partner Head of M&A Integrations and Carve-outs

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Post-Deal Integration & Synergy Capture As multiples include synergy potential, cracking the code to successful integration & synergy capture becomes even more important

Thomas Fossum

Partner Head of M&A Integrations and Carve-outs

SLIDE 2

PwC

Buyers and Sellers meet at high multiples. Fuelled by low interest rates, willingness to take risk, access to capital, and high expectations on IPOs

20 40 60 80 100 120 140 160 180 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015 0x 2x 4x 6x 8x 10x 12x 14x 16x 18x 20x Number of transactions EV/EBITDA EV/ EBITDA transactions (Sweden, 2001-2015) Number of transactions Median EV/EBITDA Average: 10.44x Source: MergerMarket, 2015-11-09 * Above data represents transactions with publicly disclosed information.

EV / EBITDA increasing

5% 50 100 150 200 250 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% LTM to Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Number of deals Analysis of mechanism types - 12 month rolling averages Total Locked Box Completion Accounts Other

‘Locked-box’ on the rise

4.5% 3.0% 3.5% 1.7% 2.1% 1.2% 1.9% 1.4% 1.3% 1.6% 0.4% 0.9%

0.7%
0.9%

0.2% 0.9% 0.6%

0.2%

0.5% 1.0% 2.4% 2.2% 1.9% 0.4% 0.5% 1.4% 2.2% 3.4%

0.3%

1.3% 2.6% 0.9% 0.0%

0.2%

(2%) (1%) 0% 1% 2% 3% 4% 5% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Inflation och real interest rate (1998-2014) Real interest rate Inflation Interest rate, 1 year government bond Source: Riksbanken and SCB * The real interest rate has been based on inflation as estimated by SCB and the yearly average of a 1 year government bond. ** As of 2011, interest rates for a 1 year government bond have been estimated based on a linnear interpolation of a 6 month treasury bill and a 2 year government bond.

Inflation and real interest rate low

4 3 3 11 7 14 11 6 10 21 20 25 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10 15 20 25 30 35 40 45 50 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Share of private equity realted introductions Number of introductions IPOs OMX Stockholm (2005-2015) Performed Planned Share PE related introductions (%) Source: Nyemissioner.se * Above data includes transfers between exchanges

No of IPOs on OMX increases

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PwC

What’s new is how often and how much above and beyond stand-alone value the Deal Value is pushed

EV/EBITDA ~14X

(Transactions, SWE Ytd’15, nov’15)

Purchase price Target’s stand-alone value Strategic premium Integration synergies

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PwC

f Buyers say

synergies constitute a key deal success factor

8% 29% 33% 4% 25% 4-6% 7-9% 10-12% 13-15% >15%

More than half of the respondents expect synergies between 7 and 12% of the targets revenue What were calculated synergies of target's revenue in per cent?

76% 24%

Synergies as a success factor Yes No

Source: PwC M&A Integration Survey, 2015

76%

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PwC

…but, when shifting focus from synergy calculations to synergy realisation, only reach their targets

46% 54%

Synergies achieved Yes No

Source: PwC M&A Integration Survey

46%

Reasons for failing

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PwC 6

Synergy potential varies a lot across functional areas, both in amounts, effort and time required

Effort required Degree of integration short long Total integration Selective collaboration Other corp. functions Finance and treasury Procurement HR Sales R&D Production IT After Sales Marketing

WHAT WHEN WHO HOW

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PwC 7

Postponing ‘difficult’ discussions during the transaction period, results in significant delays in integration & synergy capture

Deal makers are too optimistic regarding the timing when synergies become effective What was your planned timeline to realize the synergies and how long did it actually take?

Source: PwC M&A Integration Survey

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

0% 5% 10% 15% 20% 25% 30% 35% 40% 1-6 months 7-12 months 13-18 months 19-24 months 25-30 months Achieved time Planned time

WHAT WHEN WHO HOW

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PwC 8

A significant part of the gaps between “planned” and “did”, are found in roles & responsibilities

26% 44% 41% 47% 44% 76% 71% 53% 59% 62% 65% 65% 91% 100% Speed in decision making Speed in executing Selection of the right internal resources No disruption of daily business Set Future Org structure and Operating Model Project structure, responsibilities Mgmt commitment/sponsorship Activities planned Activities actually approached

Many activities are initiated pre-deal but not approached during the integration Which activities should be of primary focus in an ideal integration and which activities did you actually approach?

Source: PwC M&A Integration Survey

WHAT WHEN WHO HOW

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PwC 9

Passive, selective Active, targeted

Retention

Selectively integrate Take

ver/absorb

Best of both Transform

Degree of integration

Get 100% answers and agreement Faster is better (80/20)

Integration pace

Revenue Cost reduction IT/Ops transform

Source of value

Keep separate Hybrid by BU/geo Choose one Create new

Org structure

Monitor progress “Integration leader” Process manager

Integration leadership

Bottom up, decentralised Top down, centralised Regional/BU led

Decision making

Example Integration Fundamentals

The bottom line: Shorter time-to-synergies starts with clarifying the Integration Fundamentals

WHAT WHEN WHO HOW