By Elizabeth Kaske And Matthew McGoneGle
Despite the high cost of capital and a multitude of macroeconomic uncertainties, more than 70% of the most confident world managing directors (CEO) Bet on a return to mergers and acquisitions (mergers and acquisitions) in 2025. But to increase the creation of value and the total shareholder yield (TSR), companies may need to fundamentally modify the trajectory of their business strategy.
The corporate strategy shapes a mergers approach and acquisitions of a company
Business schools teach the fundamental principles of strategy. The CEO and the board of directors direct the business strategy to make significant changes, using various pillars, programs and initiatives to stimulate the TSR. However, we still intend to talk about frequent disconnections of business strategy at the top, below and between organizations.
Our work on thousands of mergers and acquisitions transactions reveal five actions that the transactions teams can take to improve their results:
1. Create a strong strategic game plan.
2. Allocate capital -based capital, saved by data.
3. Use artificial intelligence (AI) for a competitive advantage.
4. Press the knowledge of the transaction team.
5. Communicate the thesis of the agreement early.
Action 1: Put your strategic game plan.
The best strategy and sales teams constantly have their fingers on the pulse of their growth engines. They are preparing for each year with a plan to capture growth by organic means, such as new products and new and existing customers, and inorganic means, including mergers and acquisitions, cotvaries and strategic alliances. This strategic plan informs most mergers and acquisition decisions and should help break any decision -making decision when timely transactions land on the offices of the business development team.
Capital allowance
Many companies are able to develop their strategy, and many commercial units are competent in the creation of investment cases for their programs and initiatives. However, these companies can still meet challenges during the link between strategies and opportunities. An effective capital allowance strategy incorporates business strategy and helps decision -makers to plan, select, manage and assess investment opportunities.
Action 2: Allocate capital based on business strategy, saved by data.
In the context of M&A, this means having an approach based on facts and focused on data from volume, type and concentration areas (market, product, geography) for your offers provided for within a given time. Opportunistic transactions will appear, and when they do, decision -makers should prioritize agreements with a balanced dashboard of financial measures, such as requested capital, the return on the capital invested (ROIC), the internal rate of return (sorting) and income, as well as non -financial factors, such as strategic importance, customer satisfaction and the risk of corporate continuation.
Source of transactions
Effective buyers are constantly developing a solid pipeline of targets by various means.
Yes, it is useful to have solid relationships with investment banks that know your sector and know what assets are on the market. But business leaders in your organization know the business best. The presidents of the Commercial Unit of Effective Serial buyers identify the potential early targets and use their relationships to provide opportunities for business development.
Action 3: Use AI to get a step.
To remain competitive and maximize the acquisition potential, the intelligence transaction teams are increasingly turning to AI as a strategic tool to improve their supply in agreement and improve efficiency and efficiency. More specifically, the AI ​​can:
• Analyze market trends
• Identify promising targets
• Provisional results
• MAP Relations
• Evaluate the feeling
• Provide automated alerts
• Rationalize reasonable diligence
• Facilitate collaboration
Companies can use AI tools, such as Ey entéTo accomplish these tasks.
Action 4: Exhibit the expertise of the case team.
Transactions can start in various contexts, such as market expansion, technology acquisition or strategic partnerships. To develop a transaction strategy, use the confidence of the brain of the transactions team and advisers to navigate the complex course, initial target communication by assessment, negotiation and final offer. No details are too tiny with sequencing, planning offers and counter-offers and alignment of roles and responsibilities. These tactics help rationalize the process and limit resistance, contributing significantly to the success of the agreement.
Preliminary analysis
Although evaluation, business modeling and comparative analysis are fundamental, business leaders should not ignore their importance. The preliminary analysis is essential to verify that the envisaged agreement will lead to the creation of value and the TSR that the business strategy is designed to carry out. In addition to an effective analysis rooted in data – not in the emotions of any leader who might want the agreement to occur – this early stage is when the integration leaders must be put in the fold.
Action 5: Communicate the thesis of the agreement early.
Document clearly the investment thesis, value engines, integration strategy and resources is a leading practice which can help accelerate the subsequent phases of the agreement of the agreement after the signing of a letter of intent, the diligence begins, the transaction documents are signed and that the agreement is concluded.
By taking these strategic measures at the start of the agreement cycle of the agreement, companies can fully execute their mergers and acquisition strategies and their business strategy, allowing the creation of value and the increase in TSR. Companies waiting in these areas may miss precious time to quickly achieve value and erode the value of the agreement after closing.
Learn more Regarding how the Ey-Parthenon Mergers & Acquisitions team helps companies increase the growth of mergers and acquisitions and competitive advantages with strategic planning, supply to transactions, reasonable diligence and platforms powered by IA.
Elizabeth Kaske is Ey-Parthenon Americas Mergers and Acquisitions Leader, Ernst & Young LLP.
Matthew McGoneGle is Ey-Parthenon Transaction Strategy and Main Execution, Ernst & Young LLP.
The opinions reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the World Organization EY.
