Maintaining deal value

According to Forbes and Harvard Business Review, over 75% of company acquisitions fail to deliver the value that supported the business case to make the investment.

That figure, while confronting, reflects the day-to-day experience of General Partners across the globe, and is born out in the return profile most PE funds.

Overall, Private Equity and Venture Capital outperform the market, however not every portfolio investment achieves at expectation. There are two sides to that equation – for every portfolio investment that doesn’t meet expectation, other investments in the fund must overachieve to deliver overall fund performance

A dollar lost in underperformance needs two dollars earned somewhere else to maintain momentum.

So, why is it so, and why is this accepted as normal? Just as much work is done by just as many bright people when assessing the investments that underperform as those that end up overperforming. The investment committee is no less thorough, the due diligence is just as rigorous and the negotiations are just as tough, so why do some investments succeed where others don’t?

Well, it’s complicated. There is no single cause, and it is usually a combination of factors including culture, timing, management, systems, unrealistic expectations, and significantly, delivering on planned synergies.

It is particularly important when integrating a bolt-on acquisition to understand clearly what synergy savings are available through removing duplicated functions, divesting underperforming business units or winding down non-strategic investments.

It is a lot to ask of a management team that is already working hard to absorb the reality of the acquisition to then have them focus on time-critical synergy projects. This is where value can be lost.

The longer duplicated departments, applications or functions remain, the more the investment case is undermined. Even worse, the longer the delay, the more likely a “new normal” which incorporates all or part of the duplicated function will evolve, making separation and cost savings even more difficult to achieve.

So, what can be done?

Achieving synergy savings is a time critical initiative, which should be treated and managed as a project, delivered in a finite time with focused management and contained costs.

It is not feasible for a management team who is already dealing with the “shock of the new” and who must have growth as their number 1, 2 and 3 priorities to also spend the time and energy required to navigate a dislocating restructure program.

This is where specialists can add real value. Engaging specialist resources to plan and deliver time limited, focused and cost-effective projects to deliver synergy savings allows the management team to remain focused on what is most important. Having arms-length management of difficult costsaving programs allows the senior managers to develop a more positive culture with their newly formed teams, without being associated with the inevitable negativity of significant staff exits.

The Euca Difference

Euca is a team of senior practitioners who have direct experience of managing acquisitions and divestments in trade and Private Equity environments.

We focus on planning, leading and executing the necessary changes needed to maintain value, and keep critical resources focused on the core tasks of delivering on growth.

We are a small, specialist team which sets us apart from Big Four style firms with a land and expand business model. We believe that value is maximised when the transition process and cost is finite.

Contact us at to discuss how we can add value to your acquisition.