DISCOVER HOW TO MAKE ACQUISITIONS WORK TO YOUR BENEFIT! Between 83 and 55 percent of mergers and acquisitions fail to add value to the acquirers.

In the article below – “Can Acquisitions Work?” -- Martin Harshberger details exactly what steps need to be taken in order to assure that an acquisition is solidly beneficial. According to Mr. Harshberger, necessary elements for success include a clear strategic vision and solid integration plan from the acquiring firm that is shared broadly within both acquiring and acquired firms.

Martin Harshberger, President of Measurable Results LLC, is a business consultant based in North East Mississippi. He specializes in strategic planning, pre and post merger integration, as well as business process improvement. Before founding Measurable Results, Mr. Harshberger was CEO of two mid-sized private companies for nearly twenty years.

Please feel free to forward this newsletter to friends, colleagues, and networking contacts. (Go to www.focusbankers.com for newsletter archives.)

Active FOCUS Deals

With over 25 years of experience across many verticals, FOCUS currently has over 60 active transaction engagements in its four offices in Atlanta, Chicago, San Francisco, and Washington, DC in the following specific business sectors:

• Aerospace
• Automotive
• Building Products
• Business Process Outsourcing
• Business Services
• Call Center
• Construction
• Distribution
• Education and e-Learning
• Energy, Oil and Gas
• Food and Beverage
• Government Contracting
• Healthcare
• Information Services and Databases
• Information Technology: Hardware
• Information Technology: Services
• Information Technology: Software
• International
• Manufacturing
• Media and Publishing
• Medical Devices and Equipment
• Medical Diagnostics
• Metals and Mining
• Payment Systems
• Professional Services
• Retail
• RFID Technology
• Satellite Communications
• Security Systems and Services
• Sports
• Supply Chain Management
• Systems Integration
• Technology
• Telecomm and Wireless
• Transportation

We have executed dozens of transactions in a range of market segments, but the same fundamentals apply across all of them. Our on-going transaction process provides us with up-to-the-minute market knowledge in these sectors. Are any of them of corporate development interest to you? Give us a call or drop us a note.

Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.

Hobsons US Has Acquired Apply Yourself Recruiting Solutions

FOCUS acted as financial advisor to and assisted with the negotiations as the representative of Apply Yourself (AY) Recruiting Solutions, a Fairfax, VA firm serving the higher education admissions market for fifteen years. For the past eight years, AY Recruiting Solutions has provided an internet-based student admissions system to help subscribing schools more effectively manage recruitment communications and data management workflow applications.

Hobsons US, part of the Daily Mail and General Trust, has served the higher education market for more than 30 years. Operating in the US since 1994, Hobsons US business areas include publishing products, multimedia services, enrollment technology, research and events. Hobson has over 1300 college and university clients throughout the world. Read more...

FOCUS’ Southeast Office Expands to Charlotte by Joining with Madison Cabe Group

FOCUS is combing services with Madison Cabe Group, LLC, a Charlotte M&A firm offering transaction advisory, operational, strategic and exit planning services. Other FOCUS Southeast offices include Atlanta, Jacksonville and Memphis.

“The addition of Madison Cabe Group strengthens FOCUS across the nation, but more importantly, it provides us with an even stronger presence in the southeast,” said George Shea, regional managing partner of the FOCUS Southeast office. “The firm’s experience in the Charlotte M&A market will be an asset to the growing Southeast region.”

Matthew J. Horgan of Madison Cabe Group will join FOCUS as managing director in Charlotte. A 25-year veteran of the M&A industry, he served as president of three venture backed technology companies and as a certified public accountant with Ernst & Young. Read more...

Can Acquisitions Work?

By Martin Harshberger, President, Measurable Results LLC

With annual merger and acquisition activity in the United States averaging about 1.5 trillion dollars, that may seem to be uninformed strange question. Yet according to a number of recent academic studies, between 55 percent and 83 percent of mergers and acquisitions fail to add value to the acquirers.

Companies look to mergers and acquisitions for a number of sound business reasons. Among them are:

• To gain market share.
  
  
• To realize economies of scale especially in declining or stagnant markets.
  
  
• To gain access to products or services.
  
  
• To expand geographically.
  
  
• To facilitate a faster growth rate than through pure organic growth.

If the reasoning behind the acquisition is sound why is the success rate so low?

• A KPMG survey found that “83 percent of mergers were unsuccessful in producing any business benefits regarding shareholder value” (KPMG 1999).
  
  
• A study of 150 major deals led Business Week to conclude that ”out of 150 deals valued at $500 million or more about half actually destroyed shareholder value” (Feldman & Pratt 1999).
  
  
• A major McKinsey & Company study found that 61 percent of all acquisition programs were failures because the acquisition strategies did not earn a sufficient return on the funds invested.
  
  
• In the first four to eight months following a deal, productivity may be reduced by up to 50 percent (Huang & Kleiner, 2004).
  

It is not just large companies that fail at the acquisition game, small companies often witness similar results. Despite the reported failures, business combinations often do make sound business sense. It isn’t the deal itself that causes the failure rate to be so high; it is the outdated implementation strategies that companies continue to use.

Vast amounts of time and money are spent on an acquisition, nearly all of it in financial and legal due diligence efforts. Typically far less time and effort is invested in pre-deal implementation planning and strategy. Key people issues such as communications, strategic planning review and functional organization are treated as afterthoughts. Most feel “those things will fall into place when we close the deal.”

A merger of two companies is very much like any other partnership, just larger and more complex. There are cultures, values, work habits and attitudes that may be long standing and important to both parties. Failure to consider dealing with personnel issues effectively and early in the deal almost guarantees problems with retention of key people, productivity issues and, in worst cases, gridlock in the organization.

Companies that don’t have a clearly articulated strategic plan and clearly defined goals, communicated to all levels of the organization, with understanding and accountability at all levels, have severely reduced their chance of success.

These integration issues are compounded exponentially if everyone in the acquiring company is not “singing from the same song sheet.” They may well find over time that the acquired company’s team isn’t even in the same book.

In this situation, employees spend their time with rumors and fear of “waiting for the other shoe to fall.” Management then is forced into a reactive “firefighting” mode, rather than a planned and proactive goal oriented mode of implementation.

Frequently, management’s goals for the acquisition and its integration strategy (assuming that they exist) are not communicated below the top executive level, for reasons of secrecy. After the deal closes, the strategic direction and integration plans still are treated as closely guarded secrets with little if any communications directed at the department levels for a period of weeks or even months. No news is not seen as “good news,” and productivity and employee satisfaction is reduced.

The corollary to reduced employee satisfaction is, of course, reduced customer satisfaction. If you fail to clearly describe the reasons for the acquisition and its expected impacts to your customers, your competitors will certainly do so for you. And the picture painted by your competitors will not be pretty.

In-depth planning and communications throughout involving both the acquirer and the acquiree is key. If communications must be restricted prior to the deal closing--as may be the case with a public company transaction--a planned communications strategy must be put in place prior to closing the deal, and must be implemented immediate following closure.

Pre-deal due diligence must include cultural and value studies as well as financial and legal. A strategy must be in place before closing to insure that a strategic partnership of cultures and values is formed and that everyone understands the reasons for the transaction, the impact of their contributions and their roles going forward.

In many business combinations, some employees with be laid off or given new assignments. Bad news delivered quickly and effectively can be more beneficial than good news delivered late and ineffectively. It’s all about establishing trust and credibility.

Thus the answer to the question posed at the beginning is: “Yes, if.” Yes acquisitions can be beneficial. But they will be only if:

• The acquirer has a clear strategic vision for the combined firm and a well considered integration plan;
  
  
• Both the vision and the plan are shared broadly in the acquiring as well as the acquired company; and
  
  
• Management rolls up its sleeves to actively lead the transition.

Martin Harshberger is President of Measurable Results LLC, an affiliate of Resource Associates Corporation. Marty specializes in strategic planning, pre and post merger integration, as well as business process improvement. He can be reached at 662-844-9088 or marty@measurableresults.us.

Bob Moore Joins FOCUS as Senior Advisor

FOCUS announces that Bob Moore has joined FOCUS as a Senior Advisor in the Atlanta, GA office. Mr. Moore has more than two decades of financial, business and management experience with a deep concentration in the healthcare industry.

“We are delighted that Bob has agreed to work with us in a Senior Advisor capacity. His years of experience, particularly in the healthcare industry, will benefit all who work with him,” said George Shea, regional managing partner of FOCUS.

About Bob Moore

Prior to joining FOCUS, Bob Moore was a partner and SVP of Planning and Business Development at HealthAmerica Realty Group, LLC, a national medical real estate company. Prior to joining HealthAmerica, Bob co-founded and served as Executive Vice President of Surgicoe…he is a published author of numerous articles in healthcare industry and trade journals. Read more...

RECOMMENDED READING: US M&A Activity Jumps to $10.5B in Q3

The October 1, 2007 issue of the Silicon Valley / San Jose Business Journal reports thatUS venture-backed companies and their investors may be in the midst of another liquidity boom. According to the quarterly US Liquidity Report released by Dow Jones VentureOne, 90 venture-backed companies announced more than $10.5 billion in merger and acquisition transactions in the third quarter, a 31 percent increase over the same period last year and the highest quarterly amount since 2000.

“…So far this year, $28.4 billion has been raised via M&A transactions and another $4.7 billion raised in public offerings. This virtually guarantees that 2007 will be the largest year for venture-backed liquidity -- both in terms of IPOs and M&As -- in the US since the dot-com boom," said Jessica Canning, Director of Global Research for Dow Jones VentureOne…information technology companies accounted for the bulk of the capital raised via M&A…a 64 percent increase for the segment over the third quarter of 2006.”

RECOMMENDED READING: To Sell or Not to Sell?

In an October 1, 2007 Wall Street Journal article -- “To Sell or Not to Sell? -- Riva Richmond says that it is a question that can tear families apart. But, if done right, it doesn’t have to. According to the article:

“‘For the owner of a family business, it's not just a financial asset, it's a heritage, it's a culture, it's status in the community,’ says Francois M. de Visscher, founder and president of family-business financial-services specialist de Visscher & Co., Greenwich, Conn. ‘The decision to sell is always a very difficult decision. And that decision needs to be reached on the basis of a sound evaluation of the alternatives, and has to be based on trust among the family members and information and communication’…And if a family wants to make an exit but isn't comfortable with an initial suitor, it can enlist investment bankers or business brokers to try to drum up a buyer it can live with.”