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Upstream structuring and non-financial considerations: two essential elements of any M&A project

Extra financier

Just because the numbers add up doesn’t mean a merger will be a happy one. When it comes to mergers and acquisitions, it’s not uncommon for seemingly ideal targets to turn out to be very difficult to integrate. The experts at AURIS Finance, a consultancy specialising in mergers and acquisitions, give you their advice.

Against a backdrop of macroeconomic uncertainty and inflation, mergers and acquisitions (M&A) have fallen sharply. In 2023, the cumulative value of global M&A deals fell by 21% year-on-year, reaching a 10-year low. However, 2024 should end on a better note, particularly in the French market. According to Refinitiv (LSEG) rankings, domestic transactions in France increased by 24% in the first quarter of 2024. France ranks 7th in the world for inbound transactions ($17.4bn of transactions involved a French target), while outbound transactions reached $18.9bn.

The importance of non-financial factors

But not all mergers are successful. In fact, almost 70% of mergers and acquisitions fail to achieve their strategic objectives. The reason? Poor initial preparation and too little attention to the human element. As a result, all operations focus on two main aspects: financial feasibility and the post-merger strategy to be implemented. However, it is important not to neglect the human factor. Indeed, a merger is a source of stress for employees, both on the part of the target company and on the part of the acquiring company. Rumours about synergies can lead to the belief that many people will leave. That’s why it’s important to carry out an HR audit before the transaction and then to communicate throughout. This audit should provide visibility and transparency for employees, who will be better able to anticipate and engage with the new organisation.

Preparing the company for its future growth

The other pitfall is to ignore non-financial factors. Yet they are crucial to a successful operation. In addition to the financial value created by the new entity, the viability of the model as a whole needs to be examined. This requires going beyond a simple analysis of the business model and its post-acquisition evolution. Operational structuring can help prepare the business for future growth. The aim is to put the acquiring company in a position to welcome the target. All aspects must be considered and carefully managed. CSR implications need to be addressed before the target is integrated. This will enable the company to anticipate its future strategy. In this context, the presence of the target’s CEO at this stage is crucial. It will enable a costed plan to be drawn up involving all parts of the organisation.

Our experts at your side

With the right advice, a company director has the means to achieve his strategic goals. At AURIS Finance, our experts are specialised by sector. Our specialists are all former company directors who have been involved in mergers and acquisitions during their careers. Supported by financial analysts, they are at your side throughout the transaction, working with you to develop an operational structure.

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#AURIS Finance