M&A TRENDS: THE SECRETS OF A SUCCESSFUL M&A STRATEGY
Fast-growing companies use external growth (M&A) as an essential lever to consolidate their activities and adapt to the new industrial landscape. This transformation has become an additional lever, or sometimes a necessity, to maintain an increased pace of growth.
Recent deals in the travel and travel tech sectors provide a good illustration of this phenomenon:
Travelsoft integrates Traffics, Travel Compositor, Eventiz and more recently 3 new acquisitions: TravelgateX, Atcore Technology and Travel Connection Technology to achieve critical mass with global coverage:
The diversification of its offerings and its new technological capabilities give it a competitive edge, enabling it to offer a wider range of innovative, customised solutions to its customers worldwide.
American Express GBT has recently acquired CWT (currently undergoing regulatory approval) and Egencia, consolidating its position as a global leader:
Enabling a broader range of offerings across all customer segments, a larger geographic footprint, increased negotiating strength with suppliers and additional efficiency gains.
CDS has acquired CRC and Goelett, to increase its depth of offer and its position as European leader in business travel:
By combining the strengths of these entities, CDS can cover new markets, diversify solutions for agencies and corporate clients, and use best practices that can be transposed to new countries.
The IMPACT CONSULTANTS team of experts will guide you step-by-step through the various areas of intervention, to apply best practice in terms of external growth:
1. Preparation and Preliminary Assessment
Acquisitions as a growth accelerator
As these players have demonstrated, an external growth strategy enables companies to rapidly acquire new skills, penetrate new markets and strengthen their competitive position. A merger or acquisition between two companies significantly accelerates development and enables identified growth drivers and synergies to be realised.
Whether the aim is to increase revenues, extend geographical reach or diversify product offerings, the external growth strategy must be integrated into the company’s overall strategy, by defining the levers targeted using predefined evaluation criteria.
Confirmation of opportunity
A preliminary review helps to confirm the target’s value-adding potential in relation to the levers targeted, as well as the points to be explored during the due diligence phase:
- Financial overview and additional contributions
- Resonance of the offering on the market (product fit)
- Assets on which to base growth (human, technological, trading)
- Reputation and initial assessment of cultural compatibility.
2. Due Diligence (DD)
Due Diligence is a critical stage in the M&A process: it identifies and assesses in greater detail the strengths, weaknesses, risks and opportunities of the target company. This analysis helps to ensure that the acquisition is viable and to determine its real and projected value. Four areas are generally analysed: financial and legal, commercial, product and technical.
Financial & Legal :
- Audit of financial statements, cash flow analysis, debt/asset valuation, verification of financial projections and valuation bases.
- Review of key contracts, identification of potential disputes, verification of regulatory compliance and review of tax obligations.
- Anticipation of the union and synchronisation of the two entities, whether they are fully integrated or remain separate.
Commercial scope :
- Analysis of market position (market fit, strength, competition): assessment of customer segments and their potential. Study of competitors, areas of differentiation and potential threats.
- Depth of strategic agreements: analysis of existing partnerships and strategic alliances. Interviews or discussions to assess the strength of these agreements.
- Revenue assumptions and comparisons: assessment of commercial strategy, distribution channels and business models. Comparison of projected revenues with industry benchmarks.
Product scope :
- Product fit & competitive benchmark: Assessment of the product range, product fit with the market and product life cycle.
- Functional review & roadmap: Analysis of innovation capabilities, development pipeline and product differentiation areas.
Technical scope :
- Scalability, technological debt: Review of IT systems, code versions used and IT architecture structure.
- Product delivery: Review of development methods and their ability to deliver consistent value to customers.
- Security and penetration testing: Verification of security standards, regulatory compliance and system resilience.
3. Negotiation and Structuring of the Agreement
Once the due diligence confirming the potential has been carried out, the negotiation phases can begin. It is important to establish the terms of the acquisition, including the purchase price, payment terms, guarantees and indemnities, the transition period and any conditions precedent. The key stages in this process are
- Letter of Intent (LOI): Preliminary document that describes the main terms and intentions of the parties before proceeding to more detailed agreements.
- Signing: Signing of the definitive agreement where the parties formally commit to the terms of the acquisition.
- Closing: Completion of the transaction once the conditions precedent have been satisfied, including the transfer of assets and payment.
4. Synergies and integration
Integration execution (or PMI: Post Merger Integration)
Integrating the acquired structure into the acquirer’s operations, systems and culture is a crucial stage in an external growth operation, requiring a detailed action plan and stakeholders defined in advance. The aim is to have a plan ready for execution on D-day, with transitional governance and predefined teams who already know each other.
It is important to note that merging into a single entity is not always necessary. Sometimes it may be more appropriate to keep the entities autonomous in order to preserve certain specific synergies and maximise the benefits of the acquisition.
Integration execution (or PMI: Post Merger Integration)
Ongoing evaluation ensures that the strategic objectives are met and that the acquisition delivers the expected value. The impact of the acquisition is monitored and evaluated using predefined indicators:
- Commercial and financial performance
- Realisation of synergies
- Decisions on adjustments to be made
- A new phase of growth acceleration may also result
Sales acceleration
To optimise and maximise external growth operations and commercial acceleration, it is crucial to explore additional avenues such as market expansion, entry into new customer segments and product development. An adjusted business plan, with realistic financial projections based on new growth opportunities, internal capabilities and market realities, as well as targeted marketing actions, is essential.
The contributions of IMPACT CONSULTANTS :
As an expert in the travel, transport, mobility, leisure and healthcare sectors, providing solutions to growth challenges, IMPACT CONSULTANTS guides its clients through :
- Expert insight and deal-making capacity.
- An entrepreneurial, operational and financial vision acquired through our assignments and investments.
- In-depth knowledge of the ratios in our sectors, with direct access to information.
- A methodology for taking a step back to confirm and secure assumptions and synergies.
- A track record of transactions and investments, with assignments led by our partners.
Contact our team of experts!
They will guide you step by step through the various stages of your external growth strategy, drawing on best practice.
Alexandre Veau, Flavie Picart