July 2015 - Best of the West
A letter from CEO Kevin McCarty discussing our July issue of Best of the West
Date : July 15, 2015
This issue of “Best of the West” highlights mergers and acquisitions; how it impacts our clients, whether directly as deal participants or indirectly through the effects of an evolving competitive landscape.

Last month, we hosted our second annual Mergers & Acquisitions Summit for a diverse group of executives from the private equity, healthcare, manufacturing, banking, and professional services communities. There was a lot to discuss, including issues both “old” (continuing challenges with technology and data integration) and “new” (security and workforce culture, among others).

In fact, a July CFO article included data from Thomson Reuters showing nearly 20,000 deals totaling $2.2 trillion have been announced as of June 29 this year. This number is up 40% from the first half of 2014 and very close to the $2.3 trillion in deals that closed the first half of 2007.

That article cites the growing number of “big” deals. These get the headlines, certainly, but from our perspective, the real action is in the middle market. Both private equity and corporate buyers flush with capital are competing aggressively for acquisitions, driving valuations higher. Among the deals with which we have been involved, the healthcare and manufacturing sectors are particularly hot, and a growing percentage of transactions have global considerations. Many current transactions focus on acquiring technology or capabilities that enable companies to evolve and transform their operations rapidly to compete in changing markets.

Not surprisingly, mergers and acquisitions are touching more and more of our clients, whether directly as deal participants or indirectly through the effects of an evolving competitive landscape. In this newsletter, our teams share a few perspectives relevant to organizations involved in transactions today. In addition to a summary of our M&A Summit discussions, other articles include:

Even if you aren’t actively involved in the M&A marketplace, it is prudent to keep an eye on transactions that could affect your market and competitive position—and just as importantly, continue to challenge your organization’s status quo and find ways to innovate and differentiate your organization. Either way, our team is always here to share experiences and ideas. And if you’d like to know more about the output of our M&A Summit and/or participate in the next event, please do let us know.

Best,

Kevin McCarty

How can you be sure you are incorporating the right tools, and not just the available tools, into the new organizational environment? To ensure a high-performing data environment amid the varying external market factors that can affect transactions, private equity firms need to emphasize these three critical success factors within each transaction, both during diligence and after closing.

One of the many decisions made during the course of completing a merger or acquisition involves IT managed services arrangements for the combined organization. The “obvious” conclusion would seem to be wrapping the new operations into the acquirer’s existing service arrangement. But this recent experience from our Performance Services work with one client illustrates why a more thoughtful evaluation process could be beneficial—and could be a key to helping the evolving organization successfully integrate acquired firms.

Global merger and acquisition activity hit record levels in 2014, a trend that is expected to continue and even accelerate through 2015. Based on historic results, over 70% of merger transactions can be expected to result in failure and negative return for investors. This white paper reviews areas often overlooked during integrations that can cause post-merger challenges: employee compensation, performance management and career progression.

As deal volume continues to pick up, I can’t stress the importance of evaluating the customer experience along the way. Many of these mergers will fail to achieve their revenue synergy goals and original investment thesis. Why? The most important part of a merger is often an afterthought: the customer and partner experience.

From our second annual M&A summit, we learned that some things never change (integration is complex and messy) and that some threats (security and culture) are becoming critical due to changing conditions and workforce dynamics. In this article, we review some of the common hurdles faced by attendees as well as their lessons learned.

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