By Stephen Nash, partner at global law firm Eversheds
Boards of global businesses are under pressure to drive growth, with international deal-making and merger and acquisition activity both important strategic business tools for those in the telecoms sector.
However, driving real value from deals is a key factor for future success and the main area where problems can arise.
To gain further insight into best practice in cross-border M&A, Eversheds commissioned a global report that highlights some of the common issues that can affect the successful conclusion of and future prospects for international merger and acquisition activity.
Over 400 firms across many business sectors were questioned and their insight sheds light on some of the key areas that the business community needs to be aware of when assessing and tackling M&A activity.
From a broad perspective, “The M&A Blueprint: from inception to integration” report found a number of areas of consensus.
These included a general acknowledgement from nearly half of the companies questioned that the failure to address post-deal integration from the early stages of deal due diligence was a major concern. It is felt that this often compromises the ultimate benefit and value of cross-border M&A.
In telecoms, over one fifth (22 percent) of respondents admitted that integration post-deal did not proceed as expected.
This led to problems and a failure to drive the value expected from the deal. Indeed, this points to a need for deal teams to take a more holistic approach and develop stronger and earlier connections between the planning, completion and post-deal integration phases.
Linking to the focus on integration, 53 percent of telecoms legal teams were tasked with integration planning before the due diligence stage, compared with 44 percent of businesses overall.
This is an important factor given the broad agreement across all business sectors of the primary importance of integration planning early in the deal process for better outcomes.
It is in the area of legal team involvement that other key issues are highlighted in the report. A lack of joined-up thinking was especially prevalent in the sector, with some 67 percent of telcos saying they had used separate in-house legal teams to complete deal and then integration activity.
With regards to legal risk of any potential deal, the senior business managers surveyed as part of the research highlighted this as an increasingly important area of consideration.
General counsel can provide essential input to highlight potential issues and nearly half (47 percent) of organisations in the telecommunications sector said they had identified potentially damaging issues early enough in the deal process to caution senior management about proceeding with the deal to conclusion.
Experience of deals within a legal team was also highlighted as an important factor for deal success, with less experienced members of any deal team finding the process challenging. Even those teams that could offer a wealth of knowledge believed improvements can be made in the deal process.
It is clear that the overriding factor contributing to the success of a cross-border deal is the presence of a core team providing the “connective tissue” to link all of the phases together, and take the deal from the inception stage through to post-completion integration.
Businesses in the telecoms sector should start to join the dots between the different and challenging phases of the deal cycle to move the focus from simply “doing the deal” to thinking about life for the business beyond the transaction itself.
Last chance to take our second annual customer experience survey. Click here to share your views