Deals are becoming more complex as companies increasingly use mergers and acquisitions (M&A) to pursue ambitious strategic goals. More and more businesses are turning to dealmaking to obtain capabilities and respond rapidly to fresh challenges—from developing new business models to digitizing operations.
The market has also become intensely competitive. M&A valuations continue to rise, and the pool of attractive targets is shrinking in some industries. All this change calls for dealmakers to maintain an unwavering focus on strategic value across the entire deal cycle.
Complexity manifests itself in two ways: the degree of difficulty created by specific complexities, and how complexities in a deal compound. A complex deal might require the buyer to step out of its comfort zone to enter a new line of business or radically shift its operating model. It’s also likely to involve additional complexities, such as the need for business-process transformation or new tax structures.
Each layer of complexity raises risks and creates additional headwinds against the success of the deal. Unforeseen complexities can delay execution, sapping momentum and delaying synergy capture. But the market rewards acquirers for synergies delivered, not forecast—and often punishes acquirers that fall short of expectations.
In this environment, M&A executives are driving toward value faster, assuming more operating risk, and pursuing extraordinary synergies that enhance relationships and partnerships. They must also consider such factors as managing talent in a tight labor market or satisfying investor demands on environmental, social, and governance (ESG) concerns.
The ever-growing complexities—coming on top of traditional challenges such as clearing regulatory scrutiny and executing cross-border purchases—require enhanced ways of thinking and shifts in mindsets, ambition, and execution. To win in today’s unusually complex market, dealmakers must develop and maintain a greater strategic focus on value while tailoring their approach to the specifics of the deal.
The foundational step is to clearly define at the outset the strategic value that the transaction is intended to capture and the value-creation mechanisms that will deliver it. The specifics may evolve along the way, but the overall strategic goal is always there—the North Star that guides every decision across the deal’s lifecycle. The focus on value creation mechanisms will determine the approach to due diligence, preparations for Day 1, talent engagement, and post-deal actions in light of an evolving market landscape.
Companies may make five practical moves to improve their odds of success when they undertake a complex transaction:
- Make strategic value your North Star
The ultimate payoff from complex deals is often strategic value—new opportunities or ways of doing business that build long-term value. These deals transcend traditional synergies. The strategic goal of the transaction must be clearly defined, widely supported, and pursued methodically and relentlessly.
- Play offense to win during diligence
Diligence should not be a “check the box” exercise to validate baseline assumptions. It’s your opportunity to identify even greater sources of value and explore the art of what’s possible with target management. It’s also an opportunity to ensure your own organization is clearly aligned on key levers of value.
- Get a running start before Day 1
Complex deals demand a different approach to Day-1 readiness—one with greater purpose, intensity, and speed. Sophisticated buyers use the sign-to-close window to protect business momentum, find and mitigate blind spots, continue to seek even higher synergy upside, and accelerate tailored integration planning.
- Adopt a people strategy for the times
More than ever, the value of a target lies in the capabilities, energy, and culture of its people. Tight and evolving labor markets raise the risk of losing talent—and reduce the likelihood of quickly finding replacements. To make complex deals work, you need a people strategy fit for today’s talent realities.
- Think continuous value creation
Buyers define synergy targets at the outset, but they shouldn’t stop there. Be alert to new opportunities that arise and prepare to flex as markets, leadership, and strategies evolve.
The winning formula for success in complex deals is deceptively simple: mount a quest for strategic value, relentlessly pursue synergies, and prevent value leakage with a more robust execution model.
Learn more in KPMG’s latest report, Navigating Complex M&A: how to win in the age of the complex deal.