Key to M&A Success – Building on Your Company’s Key Capabilities

building-blocksAccording to PwC’s survey results, the key to successful M&A deals is to understand what are your company’s key capabilities and whether the contemplated acquisition builds on or adds to those key capabilities.

Your company’s key capabilities are the three to six things your company does uniquely well to create value for customers

Excerpt from PwC’s “Strategy and Foresight” Newsletter (Click Here)

In Deals That Win, we looked at 12 years of M&A data and found that capabilities-driven deals deliver an astonishing premium. On average, they outperform other deals by 14 percentage points a year. The key insight? Focus on acquisitions that leverage, enhance, or build scale around your key capabilities to create a winning deal that helps you lead the market.

Excerpt from “Deals That Win” article (Click here)

This is the main lesson that emerges from Strategy& Foresight’s most recent study on the role of capabilities in M&A success. When we examined 540 major global deals in nine industries announced between 2001 and 2012, we found that deals that leveraged the buyer’s key capabilities or helped it acquire new ones produced significantly better results, on average, than local stock market indexes in the two years following the deal. And they produced better results than deals done with other rationales in mind. The overall premium for capabilities-driven deals above other types of deals was a 14.2 percentage point compound annual growth rate (see Exhibit 1) — even higher than the first time we did the study, in 2012, when we analyzed transactions that took place between 2001 and 2009. This year’s study was also more comprehensive, and included hundreds of deals that weren’t in the original study.