As M&A in manufacturing heats up, rising interest rates and inflation serve to reduce the potential value of these mergers, especially without good planning. A thoughtful strategy can help generate value via M&A. Here are some critical tips to keep in mind.
Start Early and Plan Ahead
A merger demands time and expertise, and the more of both you have, the better positioned you will be to manage problems as they arise. Bring in the right teams early to prepare for the sale as well as the post-sale integration. Intelligent dealmakers are constantly re-evaluating ways to fast-track the realization of the promised deal synergies.
Optimize Digital Opportunities
Keep an eye on potential automation and digital opportunities that could boost transaction efficiency. One recent McKinsey report suggests that reducing the costs of traditional legacy systems may offer about a 2% boos tin value. Adding additional digital and analytics technologies to boost efficiency may generate savings as high as 4-5%.
Identify and Address Staffing Implications Early
Workforce implications to a deal should not be an afterthought. You must focus on strategies for retaining talent, even when doing so increases costs. Contract talent increases integration risks. It’s better to spend a little more upfront on retaining key talent. Consider it an investment in the future of the new entity.
Adapt to the Needs of the Business
Too often, dealmakers attempt to adapt the business to the needs of the deal rather than the other way around. Your targets should be tailored to the needs of the business. Develop specific benchmarks for measuring success, and continue to adapt these benchmarks based on real-world data.
Simplify Technological Complexities
Manufacturing mergers often trigger significant and complex technological challenges. These strategies can help simplify:
- Nurture a flexible data and transaction architecture.
- Leverage proven integration patterns rather than trying to invent your own.
- Cloud-first always. Cloud-based technologies save time, money, and frustration.
- Create a standalone mirror copy to test new technology before attempting to fully transition or integrate.
In an uncertain world, intelligent planning is critical to the success of manufacturing M&A. Your plan must be well-planned, well-executed, and fully informed by the realities of your niche. Expert insight can help you ensure your deal is prepared to meet the challenges of the post-pandemic world, and protected against the looming specters of inflation, rising interest rates, and a pandemic backslide.