How companies must redefine their M&A strategy to drive competitiveness in a digital world
Companies historically have viewed mergers and acquisitions as a way to spur growth by “bulking up”: adding scale and market share by combining with another organization offering similar or complementary products or services. Such deals remain important in some industries and circumstances. But the focus of M&A increasingly is shifting. Digital disruption and industry convergence are forcing companies to adapt to a new ecosystem—and adopt a new M&A strategy that enables them to pursue more strategic, smaller acquisitions that can serve as a platform for new business models that boost growth and innovation.
Are You Ready to Step Outside Your M&A Comfort Zone?—Infographic
Leading companies are redefining their M&A strategy to drive competitiveness.
View the infographic [PDF, 855KB]
Leadership traditionally has been defined by having more customers, a broader geographic presence, and an optimized cost base. But with the digital revolution’s speed of change, leadership—and resulting shareholder value—increasingly hinges on building agile and adaptive new business models that unlock growth and innovation through new types of products and services. As companies shift their M&A focus from scale and synergies to enablers and capabilities, they will need a new approach to both pre- and post-deal activities. They will:
Look for different targets, often small, nascent businesses operating in new industries, not large competitors in the same or an adjacent industry with complementary offers
Assess the value of the targets differently, relying on proxies and new criteria such as R&D spend, disruptive potential, and magnitude of strategic impact instead of classic valuation techniques
Focus on innovation and transformation during integration rather than removing redundancies and maximizing synergies
To effectively identify, value and integrate smaller strategic targets, companies need to:
Develop an M&A vision that aligns with the dynamics of their industry in the face of disruption and convergence.
Adapt the criteria and decision frameworks for evaluating their portfolio and acquisition targets to fully understand a deal’s impact on their portfolio - and how it will enable them to redefine their business model.
Accelerate their overall M&A decision making to move at the speed of the market and avoid missing out on key opportunities to acquire vital capabilities.