Success in M&A market requires bold moves - and advance prep

Now's the time to look for smart deals to catalyze business transformation

If the news coverage is anything to go by, 2023 has been a slow year for mergers and acquisitions (M&A) activity. It’s fair to say that high interest rates, persistent inflation and economic uncertainty have created less-than-favorable conditions for deal-making.

But there’s a silver lining. Savvy buyers are using the slowdown to their advantage, investing in deep market research and strategic planning so they’re ready to make bold moves when the right opportunities arise, such as a high-value deal at just the right price. Recent history shows this to be a wise approach: Companies that completed acquisitions during the economic downturn in 2008 and 2009 performed better over the long term than those that didn’t.

M&A, a critical growth strategy

Make no mistake, M&A isn’t going anywhere. It remains a critical avenue to growth in a highly competitive business landscape. And as the market is expected to tick back up in 2024, now’s the time to optimize your M&A strategy to capitalize on the opportunities ahead.

Here’s the catch: Fortune may favor the bold but not the unprepared. Those who are prepared have built the critical muscle developed from doing repeatable deals and implementing lessons learned along the way. Study after study shows that 70-90 percent of M&A deals don’t achieve the results buyers were looking for – mainly due to lack of alignment to business strategy, underestimation of the scope of execution, or lack of specificity in targets and desired outcomes.

Done right, though, an M&A can serve as a powerful catalyst for your company’s digital transformation. Here at CGI, we’ve seen this play out first-hand, with over 40 years of M&A experience and more than 100 transactions and client engagements under our belt.

From my perspective, the most successful M&A deals achieve one or more of the following objectives:

• Stabilization: In particularly volatile or uncertain sectors such as technology or energy, joining forces with financially stable or complementary companies can help buyers shore up their position, expand into steadier markets, and reduce risks. This is generally a conservative approach primarily focused on cost savings and delivering incremental value
• Optimization: Call it the “1 + 1 = 3” effect – or deals that leverage the strengths of both buyer and seller, allowing them to streamline operations, eliminate duplication, and combine best practices to make everything run smoother and faster. Exponential value is expected.
• Transformation: These deals accelerate shifts in a buyer’s business model – whether that’s through adopting advanced technologies, embracing new digital strategies, entering new markets, or revolutionizing customer experiences. These deals are characterized by high risk and high reward and deliver breakthrough performance.

Before you act, clarify your “why”

Start by doing your homework if you’re considering a merger, acquisition, or divestiture in the near- or mid-term. An extensive M&A framework with workstreams that cover every angle -- from client communications to IT migration, and a suite of reusable, adaptable templates to guide the process.

1. Get crystal clear on your goals. Ensure your merger, acquisition, or divestiture aligns with your business strategy and long-term goals. Assess how the deal fits your company's vision, mission, and growth plans. Ask yourself: How will this help stabilize, optimize, and transform my business
2. Establish clear, measurable business objectives. Are you seeking to expand your market reach, gain new technologies, diversify product offerings, or enhance operational efficiency? Each objective will drive your acquisition strategy.
3. Consider every angle. What local labor laws do you need to be aware of? How will people and culture be impacted? What change management strategies do you need to apply? Carefully think through the downstream effects of the deal before you act.

It’s a known fact that companies that are most successful at M&A are those that do more deals more often. They’ve learned that preparation, a comprehensive and strategic approach, and bold, decisive moves when opportunities arise are the ingredients for success. By taking a similar approach, you’ll be poised to succeed in today’s M&A market – and reach new heights in your digital transformation.

Ready to learn more? Our M&A advisory services are part of our business strategy services under our business consulting practice. We help you Define and execute a purpose-driven strategy to respond to change and build long-term financial, customer, human and societal value. Partner with our industry experts on a pragmatic, action-oriented approach to building adaptable and client-centered business strategy.