Using ZBx to power the M&A machine
June 21, 2018
June 21, 2018
Established players in just about every industry are losing market share to agile, digital-first competitors and niche, specialized brands. In parallel, activist investors continue to apply pressure on boards and executive teams to transform their businesses, responding to the threat of industry disruption.
Shifting to a zero-based mindset (ZBx) is vital for large enterprises. Taking a clean-sheet, zero-based approach, ZBx helps companies identify non-working money to reinvest in growth. The world’s largest companies using a zero-based approach have shown average annual bottom-line savings of more than US$260 million, according to Accenture Strategy research.1 But, cost savings alone won’t cut it. ZBx also involves reallocating funds to pivot to the New, pursue innovation, drive organic growth and fuel M&A. In the case of M&A, ZBx doesn’t just free up cash to buy strategic assets, it also helps drive better synergy outcomes. Applying the ZBx methodology during the integration planning process helps to drive larger synergies, and sets up the organization to implement them from Day One. It’s actions like these that allow large corporates to take a proactive stand against would-be disrupters.
ZBx savings can be reinvested in either organic or inorganic growth, for example through new business models or digital capabilities. Much has been written on driving organic growth using a zero-based approach, but relatively little about how to use ZBx savings to accelerate inorganic, M&A-based growth. This is untapped potential, as currently only 14 percent of companies claim to utilize ZBx in an M&A scenario.2 Yet M&A is clearly a popular growth strategy, with 84 percent of executives indicating their firm has acquired another company in the past two years.3 Accenture Strategy has identified four types of M&A deals being used by large corporations in response to disruption:
No matter the deal type, if a company embeds a ZBx approach into its core, it can drastically accelerate and increase the value created from an M&A deal. Through our M&A client experience, we’ve seen this happen in five areas:
Companies who have demonstrated the use of ZBx to improve their own operations have a clear advantage when going into an M&A deal—they are able to see, through a very clear lens, inefficiencies and opportunities to increase value, and they are able to execute at pace from Day One. This muscle builds with each successive deal, creating a repeatable platform—a machine for growth and value creation.
1 Accenture Strategy research, Beyond the ZBB Buzz, 2018
2 Ibid
3 Accenture Strategy, M&A: From Art to Science, 2017