M&A Integration:

Choreographing great performance

PwC’s 2017 M&A Integration Survey Report

March 2017
A publication from
PwC’s Deals M&A
Integration practice
Table of contents

The heart of the matter 3

As companies do more transformational deals, complexity

rises and success increasingly depends on strong coordinated
leadership over the integration process.

An in-depth discussion 5

When transformation is the goal, organizations find strategic

success more elusive, particularly in go-to-market areas.
A disconnect exists between the difficulty of reaching strategic
goals and the positive financial results many deals achieve. 9

Many organizations are climbing the maturity curve in

integration skills, though integrating people and across
functions and geographies continues to be a challenge. 13

Dedicated integration leaders and a well choreographed

integration team can drive better deal performance. 21

What this means for your business 25

Choreographing great integration performance requires

early involvement of integration leadership and a long-term
commitment to achieving transaction objectives.

PwC’s Seven Fundamental Tenets of Successful Integration 27

Methodology 28

Acknowledgments 29

March 2017
The heart of the matter
As companies do more transformational
deals, complexity rises and success
increasingly depends on coordinated
leadership over the integration process.

PwC’s 2017 M&A Integration Survey Report 3

Dealmakers today are more ambitious But this year’s survey reveals new The 2017 M&A Integration Survey
than ever before. They’re using M&A challenges. Even as companies Report explores the challenges in
not only to improve the bottom line get better at achieving certain detail, allowing you to see what
but to stretch their business, adding goals, they’re struggling to reach dealmakers are getting right about
new and often unfamiliar capabilities. others—perhaps because their integration and where they need
expectations are changing. to improve. Along with the survey
Reaching into unknown territory Workforces are increasingly diverse results, we offer our insights to
for growth is, of course, riskier than and multigenerational, and most assist you in making decisions
combining organizations that have a industries are undergoing some when choreographing your
lot in common. It requires leadership form of digital disruption. Though organization’s next big performance.
to take a coordinated approach to many business leaders judge it
integration, with a focus on fostering more prudent to buy than to build
a cohesive culture. After all, if people talent and capabilities they need
across the organization aren’t on to join the ranks of the disruptors.
board with the transaction strategy, By definition, that may mean
integration execution will likely falter. integrating a completely different
type of organization, with capabilities
PwC’s tri-annual M&A Integration far outside the acquirer’s core.
survey, here in its 20th year, has
tracked the integration strengths
and weaknesses of public-company
M&A since 1997. Many lessons
have held up well, regardless
of the economic environment:
Early planning, rapid execution,
and long-term commitment to
integration completion improve
the odds that M&A will meet
objectives and deliver value.

PwC’s 2017 M&A Integration Survey Report 4

An in-depth discussion
When transformation is the goal,
organizations find strategic success
more elusive, particularly in
go-to-market areas.

PwC’s 2017 M&A Integration Survey Report 5

Finding #1:
Companies are achieving greater financial and operational success with their deals,
but strategic success is getting harder to come by.

M&A goals are changing. Without Technology is radically remaking to innovate, many companies
question, many companies still the way people all over the world are clearly using deals to attain
use deals to achieve economies of work, shop, communicate, travel, get the capabilities they need to stay
scale and improve efficiency. But an education, invest, buy a home, competitive. For some, that can
increasingly, they’re also trying entertain themselves, and even mean integrating two very different
to achieve transformation. find love. Under intense pressure business models and cultures.

As Figure 1 shows, this trend Figure 1: Transformational deals continue to increase

continues to build. More than half
Acquisition type of the largest acquisition in the past three years:
of Fortune 1000 survey respondents
described the largest transaction
they completed in the last three 54%
years as transformational, up Transformational 44%
from 44% in 2013 and just 29% 29%
in 2010. Meanwhile, the number
of absorption deals has halved 20%
Absorption 29%
since 2010, while tuck-ins show
40%
a modest but steady decline.
11%
To some degree, the ongoing shift
Tuck-in 15%
toward transformational deals reflects
18%
the global economy’s steady recovery
since the recession of 2007–2009. 15%
After the consolidation that many Stand-alone 11%
sectors experienced, there are simply 13%
fewer absorption targets available.
2016 2013 2010
However, other forces are at play.
Question: As for the largest merger or acquisition your organization has undertaken in the last three years,
how would you characterize it by integration type?

Acquisition Type: A Quick Glossary

• Transformational—Deals that involve acquiring new markets, channels, products, or operations in a way that is
transformative to the fully integrated organization.
• Absorption—Deals that involve acquiring and integrating similar companies as their own, such as industry
competitors. This is sometimes called consolidation.
• Tuck-in—Deals that involve acquiring and integrating relatively small companies, generally to pick up key
products or technologies.
• Stand-alone—Deals that involve acquiring but not integrating, and keeping the newly acquired entity
operationally separate from the rest of the organization.

PwC’s 2017 M&A Integration Survey Report 6

When a deal is transformational, from 2013. Only strategic success we found that deals enhancing or
strategic and execution risks are has grown harder to come by. leveraging what companies do well
high. It’s not surprising that under consistently outperform others.1
these conditions, survey respondents The higher financial and operational
are reporting strategic success less success rates represent an Another finding in this year’s M&A
frequently than in former years. encouraging trend. Yet the decline Integration survey highlights the
As illustrated in Figure 2, more in strategic success is striking and difficulty: a sharp decline in the
dealmakers say their transactions underscores the difficulty of realizing number of high performing deals.
achieved operational success, and full value from a transformational These are transactions where
exactly half report a financially deal. But this decline doesn’t come respondents report significant success
successful deal, up a smidgen as a surprise; in another PwC study, in all three areas—strategic, financial
and operational. High performing
deals dropped to fewer than 5% of
the total in 2016 vs. 24% in 2013.
Figure 2: Strategic success is getting harder to achieve
Interestingly, only 50% of serial
Percentage reporting “significant” strategic, financial, and operational deal success:
acquirers—respondents who
have done eight or more deals in
the past three years—reported
55%
strategic success, compared with
65% 66% of respondents who did three
Strategic 62% deals or fewer. When it comes to
success
meeting strategic goals, it appears
practice doesn’t make perfect.

50%
49%
38%
Financial
success

47%
35%

Operational 30%
success

2016 2013 2010

Question: How would you judge the overall success of the largest merger or acquisitions your organization
has undertaken in the last three years from the following perspective?

1 The Capabilities Premium in M&A, S+B (Issue 80, 2015) PwC’s 2017 M&A Integration Survey Report 7
Finding #2:
Regardless of the deal objective, reported success rates in go-to-market
areas have declined.

Fewer companies in 2016 reported their transaction completely met type of customer. In either case, this
complete success in achieving their its objective declined. Success rates is harder to achieve given lack of
M&A goals—no matter what the fell dramatically—from 45% to just knowledge and capabilities in the new
goal. Figure 3 shows, on the left, the 15%—for those seeking growth in spaces they are entering.
objectives that respondents described market share. And the percentage of
as “very important” in doing their companies that reported complete It’s clear that regardless of the
deals; on the right are the objectives success in gaining access to new deal objectives, transformational
described as “completely achieved.” markets plunged from 58% to 38%. deals prove to be the most difficult
to integrate. This requires more
Growth in market share; access to The results suggest that go-to-market executive leadership to better
new markets; access to new brands, goals are getting tougher to reach. understand how the target company
products or technologies; and access This makes sense given the rise in should be integrated, or not. Leaders
to new distribution channels have transformational deals, as companies should emphasize more discovery
all grown in importance as M&A increasingly want their deals to and openness to appreciate what
objectives since 2013. For all four, deliver new offerings to their existing capabilities are different about the
the number of companies saying customers or sell to an entirely new acquired business, and how to protect
and harness those capabilities.

Figure 3: Go-to-market goals are not being realized

Percentage reporting deal objective was “very important” and “completely achieved”:

Very important Completely achieved

78% Growth in 15%

62% market share 45%

75% Access to 38%

70% new markets 58%

Access to
72% 29%
new brands, products
56% 40%
or technologies

Access to
68% 27%
new distribution
40% 35%
channels

2016 2013

Question: Considering the largest merger or acquisition your organization has undertaken in the last three years, how important was each of the following
objectives for undertaking the deal? How successful was your organization in achieving your stated objectives?

PwC’s 2017 M&A Integration Survey Report 8

An in-depth discussion
A disconnect exists between the
difficulty of reaching strategic
goals and the positive financial
results many deals achieve.

PwC’s 2017 M&A Integration Survey Report 9

Finding #3:
Most dealmakers are effectively capturing synergies and improving profitability.

It’s welcome news that companies realizing both revenue and cost realization. As we’ll see later, this
are getting better at realizing synergies, with almost twice as year’s survey shows integration teams
financial benefits from their M&A many respondents as in 2013 getting involved in deal planning
transactions. As Figure 4 illustrates, reporting “very favorable” results. earlier than ever, and significant
on the whole, survey respondents emphasis is being placed on tracking
reported encouraging success in What accounts for the remarkable cost and revenue metrics. Synergies
profitability and cash flow, two improvement in financial results and are also increasingly being tied to
critical areas of performance. synergy capture? One explanation relevant corporate budgets and
may be that more companies are management compensation.
Figure 5 shows companies have implementing leading practices
made dramatic progress in in M&A Integration and value

Figure 4: Financial results are improving

Percentage reporting “very favorable” and “favorable” results:

2016 46% 36% 82%

Profitability
2013 47% 21% 68%

2016 27% 56% 83%

Financial Cash flow
2013 39% 24% 63%

Very favorable Favorable

Question: How would you characterize the results your organization achieved in the following areas?

Figure 5: Synergy capture is on the rise

Percentage reporting “very favorable” and “favorable” results:

Capturing revenue 2016 31% 52% 83%

synergies 2013 17% 37% 54%

Capturing cost 2016 42% 48% 90%

synergies 2013 23% 44% 67%

Very favorable Favorable

Question: How would you characterize the results your organization achieved in the following areas?

PwC’s 2017 M&A Integration Survey Report 10

Survey respondents say they’re Figure 6: Speed of integration has improved
integrating faster than ever before,
particularly those in high performing 88%
6 months or less
deals. The period of time between Time to achieve 79%
deal announcement and close, and the leadership alignment 12%
7 months or more
initial period post-close, are critical to 21%
realizing quick wins and setting the
course to deliver value over the long 79%
6 months or less
term. Figure 6 shows a shift towards Time to achieve 71%
stakeholder
accelerating integration in three key 21%
communication objectives 7 months or more
areas within six months of deal close. 29%

• Leadership alignment – 82%

6 months or less
increase to 88% from 79% in Time to fully integrate 59%
2013. People naturally follow operating policies 18%
7 months or more
leaders, and the sooner leadership 41%
selections are made and
2016 2013
organizations are aligned, the
faster people focus on listening Question: How long did it take your organization to achieve the stakeholder communication objectives that
were established at the outset of the deal? How long did it take the organizations to align leadership styles
to leadership and mobilizing to and speak with one voice? How long did it take to fully integrate operating policies?
implement integration tasks.

• Stakeholder communication • Operating policy integration – Another explanation for the

objectives – increase to 79% a huge increase to 82% from improvement in realizing deal
from 71% in 2013. Early and 59% in 2013. Employees better synergies may be found in the
comprehensive communication understand how to focus shift to transformational deals.
increases customer focus, their efforts when operating Capturing revenue synergies is
employee commitment and policies are integrated. Quickly known to be a significant challenge,
productivity, the speed at which integrating operating policies requiring company executives to
decisions are made, and overall helps solidify awareness of the better choreograph the integration
confidence in the direction of company’s direction and better and be held more accountable for
the integrating business. positions employees to focus on performance. Unlike absorption
the activities that matter most. transactions, with their heavy focus
on cost synergies, transformational
deals are more likely to rely on
revenue synergies to justify their
valuations. Furthermore, CEO and
Board of Director compensation is
increasingly tied to deal success,
an incentive that encourages
commitment from company
leadership.

PwC’s 2017 M&A Integration Survey Report 11

Finding #4:
Transactions today more often achieve operational targets, though they are
still hard to reach.

Among the most consistent findings However, that percentage has been
of PwC’s M&A Integration surveys steadily improving, and this year’s
has been respondents’ difficulty survey shows companies have gotten
in meeting their transactions’ better at integrating operations in
operational goals. As Figure 2 shows, some critical areas. As illustrated in
operational success remains the Figure 7, speed to market, speed of
highest hurdle—an indicator of the decision making, customer value, and
challenges of integration. Only 47% productivity have all significantly
of respondents say their most recent improved.
transaction was an operational
success.

Figure 7: Integrating operations is improving

Percentage reporting “very favorable” and “favorable” results:

2016 29% 52% 81%

Speed to market
2013 12% 32% 44%

Speed of decision 2016 34% 44% 78%

Financial
making 2013 12% 32% 44%

2016 37% 46% 83%

Operations Customer value
2013 17% 48% 65%

2016 30% 50% 80%

Productivity
2013 8% 49% 57%

Very favorable Favorable

Question: How would you characterize the results your organization achieved in the following areas?

PwC’s 2017 M&A Integration Survey Report 12

An in-depth discussion
Many organizations are climbing the
maturity curve in integration skills,
though integrating people and across
functions and geographies continues to
be a challenge.

PwC’s 2017 M&A Integration Survey Report 13

Finding #5:
Companies are focusing on integration earlier in the M&A process
and shifting integration skill sets to meet their deal needs.

Even as companies are improving If you want a deal to transform your When respondents were asked when
operational integration results business, due diligence is too late in they should have started integration,
in many areas, the challenges the process to begin asking how people reflecting back on their deal, the
are mounting as acquirers reach will actually work together. Many feedback was clear: They wish they
beyond their comfort zone to do more companies now address that had started earlier in the deal process.
transformational deals. When question during deal screening. As Since our surveys began in 1997,
transformation is the strategic illustrated in Figure 8, the percentage companies have been launching the
goal, early involvement and of respondents that brought their integration team into action earlier
having the right skill set to integration team into the M&A process and earlier in the deal process, as
deliver become more urgent. during deal screening rose to 32% many aspects of integration evolve
from 21% in 2013. The number of into more science than art. This
respondents that waited until due accelerating trend helps explain
diligence dropped by more than half. the financial and operational
improvements that organizations
are reporting in many areas.

Figure 8: The integration team is getting to work earlier

When did the integration team get involved:

32%
Deal screening
21%

24%
Post letter of intent
17%

21%
During due diligence
44%

Between signing 21%

(deal announcement)
and close 14%

2%
After the deal closed
4%

2016 2013
Question: At what point in the deal process did the integration team get involved?

PwC’s 2017 M&A Integration Survey Report 14

The integration team’s earlier As companies build capabilities to in absorption and tuck-in deals
involvement is another result of meet deal requirements, integration has declined, while stand-alone
the rise in transformational deals, teams’ skill sets are shifting to reflect deals have increased. All these
whose far-reaching strategic the increase in transformational changes are consistent with the
implications require earlier efforts deals. Figure 9 shows significantly types of deals being done, as
to realize value. C-suite executives, more dealmakers report competency previously illustrated in Figure 1.
with Board members close behind in integrating transformational
them, are scrutinizing these deals transactions. The percentage of
more closely and demanding respondents who rate themselves
that integration planning begin competent in such deals has more
promptly—almost as soon as the than doubled to 50% from 24% in
deal rationale is developed. 2013. Meanwhile, core competence

Figure 9: Organizations are shifting integration skill sets to meet their deal needs

Experience level of “core competence” by acquisition type:

50%
Transformational
24%

45%
Absorption
50%

29%
Tuck-in
52%

41%
Stand-alone
13%

2016 2013
Question: How would you rate your organization’s experience level across the following acquisition types?

PwC’s 2017 M&A Integration Survey Report 15

Finding #6:
Integration across functions and geographies is a challenge.

As we found in the 2013 survey, The most striking increase in considered a significant challenge
companies tend to lack commitment reported integration difficulty was as a result. Time zone differences,
to integration completion over in the area of geographies and legal cultural differences, and geographic
the long term, and have difficulty entities, where 57% of respondents distance are common hurdles to
completing integration in critical said integration was difficult, integration efficiency.
areas. In this year’s survey, too, we up from 33% in 2013. This isn’t
find that despite earlier involvement surprising, considering that 80% of
in the deal process and better respondents’ deals in 2016 involved
alignment in integration skills, cross-border integrations, an increase
Figure 10 continues to highlight some of 20 percentage points from 2013.
of the most difficult areas to integrate, Integrating country by country often
along with their respective results for requires significant resources and
integration completion. substantial coordination, and it is

Figure 10: Cross-border deals and cross-functional areas are the most difficult to integrate
Percentage reporting “not fully integrated” and “difficult”:

Not fully integrated Difficult

42% 58%
People
40% and organization 72%

35% Systems 63%

56% and processes 79%

32% 51%
Go-to-market
Not asked in 2013 Not asked in 2013

26% Geographies 57%

11% and Legal Entities 33%

2016 2013

Question: What areas do you feel were not fully integrated? How difficult did your organization find integrating the following areas?

PwC’s 2017 M&A Integration Survey Report 16

As we discussed earlier, go-to- Figure 11: Dedicating resources to cross-functional areas can
market (GTM) objectives are rising increase deal success
in importance as transformational Percentage reporting cross-functional teams engagement:
transactions increase. Yet according
to Figure 10, almost one third
90%
(32%) of respondents weren’t able Communications
to fully integrate GTM functions, 70%

and over one-half (51%) found GTM

integration difficult. (Note that GTM Business process 88%
was not asked in 2013.) and systems
integration 65%

Integrating business processes

and their underlying information 70%
technology systems has been a Legal entity
64%
significant challenge ever since
our surveys began. People and
organization have also been difficult 38%
Go-to-market
to integrate. In fact, respondents 30%
have named these areas as the top
two post-close integration challenges High performing deals* 2016

since 1997—not surprisingly, as IT Question: Which cross-functional teams does your organization include?
and people integration often require *Deals where respondents report the highest level of success in all three areas of performance—strategic,
financial, and operational.
the longest commitment.

As Figure 10 shows, this year’s These results reveal where companies and execute activities outside
survey is consistent with former most often get hung up and where their normal (non-integration)
results. The good news is that IT executives should ensure commitment day-to-day operations. Cross-
integration shows improvement and focus on choreography. In fact, functional workstreams in an
from 2013, with the percentage of Figure 11 shows that deal success integration are coordinated to
respondents reporting difficulty improves when cross-functional manage interdependencies and
dropping from 79% to 63%, and teams are more engaged. better enable the transition to end
those not achieving full integration state operating models.
declining from 56% to 35%. People Our experience shows that a well-
and organization integration is also designed Integration Management
less frequently described as difficult, Office (IMO) helps an integration
although 42% of respondents stay on course and focus on the right
report integration in these areas activities at the right times. On larger-
was incomplete. Not coincidentally, scale transactions, the IMO should be
fewer than half of respondents (45%) effective at launching cross-functional
described themselves as “completely work streams with dedicated project
committed” to integrating people and leaders. Integrations often force
organization over the long term. individual functions to choreograph

PwC’s 2017 M&A Integration Survey Report 17

Finding #7:
People integration remains a challenge.

Figure 12 shows the importance in transformational deal, which may issues like culture and communication
gaining access to management and involve different business models, that are tough to track with
technical talent as a deal objective go-to-market approaches, and conventional metrics, but can be
has more than doubled (from 15% in capabilities. Often, the difficulty crucial to strategic success. Successful
2013 to 33%), yet there has been a is due to lack of a cohesive, integration involves detailed planning
20% decline in completely achieving choreographed plan for the and execution when assessing leaders,
this goal (from 36% in 2013 to 29%). workforce transition and insufficient retaining the right people, designing
involvement by human resources the organization, aligning cultures,
As discussed, people integration staff in deal planning and process. and communicating effectively.
can be particularly difficult in a Leadership must also address “soft”

Figure 12: People objectives are not being realized

Percentage reporting deal objective was “very important” and “completely achieved”:

Very important Completely achieved

33% Access to 29%

management and
15% 36%
technical talent

2016 2013
Question: Considering the largest merger or acquisition your organization has undertaken in the last three years, how
important was the following objective for undertaking the deal? How successful was your organization in achieving your
stated objective?

PwC’s 2017 M&A Integration Survey Report 18

Commitment to integrating people Figure 13: Retention has become harder
and organization should focus on
Percentage reporting “significant success”:
engaging and retaining pivotal
talent. Finding the right incentives
for retaining key people during the
transition and for the long term can
be a challenge. Figure 13 shows
that fewer than half of the 2016
survey respondents were successful 11%
at retaining employees through the
transition, and the percentage has
fallen by 11% since 2010. (Note that
this question was not asked in 2013.)
56% 45%
One reason for the decrease could be
lack of clear direction for employees
and suboptimal morale, as shown in
Figure 14. Fear, indecision, and just 2010 2016
plain confusion can often paralyze
Question: How would you characterize your organization’s success at retaining key employees for the
companies until people have some transition period in which they were most needed?
sense of where—and even if—they
fit within the new organization and
what will be expected of them.
Figure 14: Employee morale and understanding needs to improve
Good talent is hard to come by and Percentage reporting “very favorable” results:
even harder to replace. This is why
people issues must be a priority
before and after the transaction
Employee morale 31%
closes. More complete commitment
to people integration over the
long term (as mentioned above)
and a comprehensive change Employee understanding
33%
management program can make of company direction
a difference. But until integration
leaders rise to these challenges, 2016
Question: How would you characterize the results your organization achieved in the following areas?
dealmakers will continue showing
poor results on people matters.

PwC’s 2017 M&A Integration Survey Report 19

 Change Management in M&A Integration:
PwC’s Seven Critical Drivers of a Successful Program

Companies commonly miss the opportunity to design and implement an effective change management
program to align and motivate people in delivering deal objectives. Integration strategy and structure may
be well planned and organized at the forefront, and tactical implementation at the functional level may be
designed for discipline and rigor over the long term. But these may not be enough, particularly in large-
scale or transformational transactions.

Even if a company shines a light on the need for change management, the approach is often “soft” and
without a set of concrete and actionable items, or fragmented and addressing only one or a few of the
critical drivers to succeed.

Companies that implement an effective change management program concurrent with the establishment
of integration structure and launch of tactical implementation can significantly improve employee
commitment and productivity, speed and effectiveness of decision making, and confidence in the direction
of the integrated business.

Designing an effective change management program in integration should include seven critical drivers of
success, all in sync with the integration strategy, and centrally managed at the executive level.

1. Culture: Corporate culture is the set of 5. Policies and Procedures: Organizations

entrenched behaviors that characterize how a enter transactions with fully functioning, self-
company gets things done. Cultural integration is contained processes and practices. During
about behavior change—not rhetoric. Changing integration, the combined company should
cultures in an integration focuses on three clearly define the go-forward policies and
critical areas: 1) defining desired behaviors, procedures that will enable new ways of working
2) deploying key role models, and 3) providing to achieve desired results.
meaningful incentives.
6. Employee Onboarding: A change
2. Communications: Communication is the voice management program would not be complete
of the change management program for the without appropriate employee onboarding and
integration. Communication is a stabilizer. It training. The integration will have many changes
keeps people focused and energized rather than in policies, procedures, systems, and processes
confused and perplexed. It builds support for a that will alter the way people work. Companies
new business proposition, new leadership and should identify areas that require integration
organization, new ways of working, and other training and design effective development
changes on the horizon. programs.

3. Leadership: People follow leaders. Swift 7. Incentives: Incentives play a key role in
selection of key management positions early in changing behavior. During an integration, it
the transition is critical to clarifying authority, is important to recognize the contributions of
assigning accountability, and mitigating the people that exhibit desired behaviors. Incentives
crippling effects of uncertainty. can be in the form of both monetary and non-
monetary rewards that will change behavior.
4. Organization: Changing roles and complex
interrelationships are not clarified with the
publication of a traditional organization chart.
People want to know what is expected of them,
what they are accountable for, what decisions
they own, and what decisions they share.

PwC’s 2017 M&A Integration Survey Report 20

An in-depth discussion
Dedicated integration leaders and a well
choreographed integration team can
drive better deal performance.

PwC’s 2017 M&A Integration Survey Report 21

Finding #8:
Executive incentives and dedicated integration leadership drive
deal performance.

As we’ve seen, companies after transaction close. Some Who then is ultimately responsible
increasingly expect their deals to common reasons observed include: for the deal? Figure 15 shows that
drive transformation and provide a 63% of survey respondents in 2016
competitive edge in a fast-changing • Changing economic, competitor, or tie CEO compensation to achievement
environment. Leadership is critical business landscape that shifts focus of M&A goals, up from just 28% in
to making this happen, and with to other priorities. 2010. (Note that this question was
the bar for M&A so high, C-suite • Unbudgeted or limited budget for not asked in 2013.) Surprisingly, the
executives and even Board members integration costs to execute long- increase in Board member incentives
are increasingly accountable for deal term business process and systems has been just as dramatic, reported
success. integration. by 34% of respondents vs. a mere 5%
in 2010. By contrast, the percentage
Our experience shows that companies • Lack of discipline or set of of respondents tying division leaders’
often lose integration momentum integration processes to manage pay to deal success has plummeted to
between six months and one year the long haul. 19% from 44% in 2010.

Figure 15: Board members and senior management are increasingly accountable for deal success
Percentage reporting compensation linked to deal success goals:

63%
Chief Executive Officer
28%

39%
Chief Financial Officer
20%

36%
Chief Information Officer
11%

34%
Board of Directors
5%

32%
M&A Leader
25%

23%
Integration Leader
42%

19%
Division Leader
44%

2016 2010
Question: Whose total compensation, if any, was directly linked to the achievement of deal success goals?
PwC’s 2017 M&A Integration Survey Report 22
Accountability for deal performance However, while the Board and C-suite to choreograph activities. The
also increased substantially for may have more skin in the game, percentages are markedly greater for
the Chief Financial Officer (almost that doesn’t always translate into high performing deals. This isn’t a
doubled) and the Chief Information coordinated leadership during M&A surprise, as our experience shows that
Officer (over tripled). This trend may Integration. As Figure 16 illustrates, dedicated leaders, committed over the
be contributing to the improvement surprisingly few respondents have long term, are able to sustain focus
in capturing synergies and financial full-time executive sponsors or on deal objectives and synergies.
success, along with the improvements dedicated functional personnel
in IT and systems integration.

Figure 16: Deals do better with dedicated leaders and personnel

Percentage reporting personnel “full time (permanent job or special project)” results:

60%
Executive sponsor
39%

100%
Human resources
77%

100%
Finance
74%

90%
Information technology
75%

80%
Sales and marketing
72%

80%
Operations
79%

High performing deals* 2016

Question: What type of personnel are dedicated to the integration?

* Deals where respondents report the highest level of success in all three areas of performance—strategic, financial, and operational.

PwC’s 2017 M&A Integration Survey Report 23

Finding #9:
Deal performance should be monitored frequently and include key metrics.

As the old adage says: If it doesn’t As discussed, companies reporting Finally, to improve deal success,
get measured, it won’t get done. greater overall deal success also companies should stay focused on
Without synergy tracking, there’s report a stronger connection the value drivers behind the deal
no synergy reporting, and without between executive and Board total and have a disciplined approach
synergy reporting, there’s no evidence compensation and the achievement of to delivering synergies and other
that the deal is being measured or integration goals. It is important for integration objectives over the
managed effectively. Figure 17 shows senior management to take a visible long-term. This includes developing
organizations are tracking deal role in championing these goals and sound operating and synergy targets
metrics more than ever before. Some metrics to help promote consensus, during the due diligence process,
revenue metrics that were tracked commitment, and accountability. planning robustly during early
on a limited basis in the past are now integration, and committing both
more common. capital and human resources to
deliver against goals.

Figure 17: Deal performance indicators are important to track deal success

Revenue-related deal performance indicators Cost-related deal performance indicators

95% Cost savings due to 96%

Revenue growth
100% integration 88%

92% 95%
Cross-selling revenue Integration costs
63% 76%

Percentage of sales 92% Targeted headcount 94%

through new products reduction
resulting from transaction 47% 64%

85% Selling, general, and 86%

Gains in market share administrative expenses
65% as percent of revenue 57%
2016 2013 2016 2013

Question: Please indicate what types of cost/revenue-related KPIs or metrics your organization used to measure the success of the deal.

PwC’s 2017 M&A Integration Survey Report 24

What this means for your business
Choreographing great integration
performance requires early involvement
of integration leadership and a long-
term commitment to achieving
transaction objectives.

PwC’s 2017 M&A Integration Survey Report 25

There’s no mystery to delivering deal In the deals you undertake, Only you know the answer, but
value. Dealmakers know what to do start by asking yourself a few your shareholders also may have
and are getting better at doing the key questions, answering them opinions, as the value of their
right activities at the right time. candidly and completely: portfolios rise and fall based on
the success of your deal making.
But the chance to falter increases if • Is your integration strategy
there isn’t a dedicated leader to take a aligned with your deal strategy? With a good strategy, the right target,
coordinated approach to integration. and appropriate deal terms, M&A
Transformational deals require more • Is your integration team success becomes all about execution.
choreography across functions and involved early enough?
geographies than ever before. If you start integration planning
• Do you understand the early, Accelerate the Transition®,
capabilities of the business sustain commitment over the long
you are targeting? term, and drive a comprehensive and
coordinated change management
• Who is your choreographer? program, you have a better chance
Do you have the right leader(s) of enjoying great performance.
driving the deal and integration?
Choreographing great performance
• Do your leaders and key will be highlighted in the deal
people have the appropriate results and create rewards that
incentives to achieve your benefit both you and the company.
deal and integration goals?

• Do you have dedicated leaders

and teams in complex and
challenging areas, such as
go-to-market, people and
organization, systems and
process, and geographic and
legal entity integration?

• Is your change management

program linked to your
integration strategy? Does it
include the seven critical drivers
of a successful program?

PwC’s 2017 M&A Integration Survey Report 26

PwC’s Seven Fundamental
1. Accelerate the transition®.
Tenets of Successful There is no value in delay. It is critical to focus on obtaining
Integration bottom-line results as quickly as possible to maximize
shareholder value. Prolonged transitions slow growth, reduce
Capturing sustained economic profits, destroy morale and productivity, and lead to missed
value in a merger or acquisition is opportunities and loss of market share.
a significant challenge. Regardless
of deal size, complexity, or 2. Define the integration strategy.
geographic reach, some fundamental Integration is a highly tactical effort, and the tactics must be
tenets are key to success for implemented in ways that capture and protect the value of the
deal. Integration priorities are easier to identify and execute
realizing deal objectives. when a clear integration strategy is well defined and
communicated.

3. Focus on priority initiatives.

Shareholder value must drive the allocation of resources for
meeting those priorities. First, potential sources of value
capture and value creation must be chosen. Then resources
get allocated based on potential financial impact, probability
of success, and timeline requirements.

4. Prepare for Day One.

Critical Day One tasks need to be identified early, before
longer-term, more detailed planning commences. This allows
for prompt identification of long lead-time items, well before
they can turn into closing day surprises.

5. Communicate with all stakeholders.

Communicate early and often with all stakeholders, including
customers, employees, investors, suppliers/vendors, and the
general public. Communications should give the reasons
behind the deal, specify the timing for key actions, and be
candid in about what is known and also what is unknown.

6. Establish leadership at all levels.

Integration efforts require significant, high-quality resources,
including committed members of the executive team. It is
critical to assign accountability, define functional authority,
and establish role clarity.

7. Manage the integration as a business process.

The larger the transaction, the more challenging the
integration, and the greater requirement for a well defined
process to focus resources and capital on the right activities
at the right times.

PwC’s 2017 M&A Integration Survey Report 27

Methodology
PwC has been conducting its M&A We asked Oxford Economics to
Integration survey since 1997. In late conduct telephone interviews with
2016, PwC partnered with Oxford these executives. Respondents
Economics, an independent survey participating in the telephone survey
firm, to survey senior management were guaranteed anonymity for
from a sampling of Fortune 1000 themselves and their companies
companies that had completed mergers and were screened to ensure they
or acquisitions in the previous three had direct, firsthand knowledge of
years. The goal of the study was to the issues their organizations dealt
understand the current state of M&A with during the M&A Integration.
Integration practices and evaluate
their impact on management’s
assessment of deal success.

Industry:
Industry: Revenue:

27% 25% 13% 12%

43%

$10 + billion
Industrial products Technology Pharmaceuticals Media and
and services Communications

31%
10% 7% 6%
$5–10 billion

26%
Financial Services Health Services Retail and Consumer $1–5 billion

Of the 151 respondents participating in the survey, 32% were at the senior
executive management level, with titles including CEO, President, COO, CFO, CIO, EVP,
and SVP. The remaining 67% were Vice Presidents from corporate development, strategy,
sales and marketing, operations, information technology, finance, and human resources.

If you would like to participate in future surveys, please contact pwcdeals@us.pwc.com.

PwC’s 2017 M&A Integration Survey Report 28

Acknowledgments

For a deeper discussion on the content of this paper or other deal

considerations, please contact one of our practice leaders or your
local PwC partner.

Authors Deals
Gregg Nahass, Partner Jim Smith, Principal Gregg Nahass, Partner
US and Global Leader, Consumer and Industrial Technology, Media, and
M&A Integration Products and Services Telecommunications
213 356 6245 Delivering Deal Value Delivering Deal Value
gnahass@pwc.com 646 471 5720 213 356 6245
jim.smith@pwc.com gnahass@pwc.com
Marc Suidan, Principal
Delivering Deal Value Paul Kennedy, Principal Steve Moore, Partner
408 607 5852 Financial Services Health Services
marc.suidan@pwc.com Delivering Deal Value Delivering Deal Value
617 530 5288 646 471 6602
paul.g.kennedy@pwc.com stephen.mark.moore@pwc.com

Bob Saada, Partner Curt Moldenhauer, Partner

US Deals Leader US Acquisitions Leader
646 471 7219 408 817 5726
bob.d.saada@pwc.com curt.moldenhauer@pwc.com

PwC’s 2017 M&A Integration Survey Report 29

www.pwc.com/us/deals
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