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Chasing rabbits versus stalking mammoths in M&A

OVERVIEW

Why companies need a new approach to acquiring non-traditional, digitally oriented targets

Companies across industries are rethinking their M&A strategy to ramp up their competitive agility. But while large companies know they need to acquire digital capabilities, they struggle to get it right. They are still playing by traditional M&A rules for pursuing big targets, the “mammoths.” In doing so, they risk losing the fight for innovative digital companies, the “rabbits.” The fact is, acquiring and unlocking value from these new targets is a different ballgame. Large companies must develop a new M&A strategy—across target screening, transaction and integration management—that’s more in tune with how these targets do business if they want to flex their competitive agility.

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KEY FINDINGS

According to Accenture Strategy research, over the next three years 72% of companies plan to acquire more than five “progressive” companies. These are non-traditional companies that are innovative, digital, technology-driven and often act as industry disruptors. But in doing these deals, many companies face some fundamental challenges:

  • They often find the “hunting” process—target screening—difficult: 69% struggle to identify the digital technologies they should buy and 69% also find it difficult to assess new technologies.

  • Once they identify a target, companies need to get better at capturing it: 62% find it challenging to accurately valuate the target and 63% take longer than seven months to complete the deal.

  • Finally, many companies need a new M&A playbook to generate value: The top two success factors in acquiring smaller, agile and innovative startups are integrating the acquired technology, product or service into the existing portfolio (71%) and maintaining the target’s innovative culture (62%).

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Technology as one of the main drivers and challenges in the new M&A approaches

Key Findings Chart

RECOMMENDATIONS

The only way larger companies can keep pace with digital disruption and stay ahead of the competition is to create a new M&A strategy for progressive acquisitions by:
Target screening

Target screening

Keep tabs on startups by participating in startup networks, exploring venture capital funds and accelerators, and leveraging open innovation.

Closing the deal

Closing the deal

Increase target certainty by assessing targets more deeply from a technology perspective, and accelerate transaction speed by streamlining the deal approval process.

Tailoring integration

Tailoring integration

Consider the acquired company’s operating model as a whole to determine which elements can be standardized and which should be preserved and nurtured.

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