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July 20, 2004
Global Merger and Acquisition Activity on the Rise

70 Percent of Companies Undertaking or Planning Mergers or Acquisitions Within Next 12 Months

NEW YORK; July 20, 2004 – Business executives have a dramatically renewed appetite for mergers and acquisitions (M&A), with more than 70 percent either currently undertaking an M&A transaction or planning to do so within the next year, according to the results of a global survey released today by Accenture.

The survey, which queried more than 100 executives at large companies in North America, South America, Europe and Asia, found that a confluence of factors, ranging from the global economic recovery to a perceived lack of organic growth opportunities and increased debt availability, are spurring this activity.

At the same time, survey responses indicate that overall deal size relative to percentage of acquiror revenues is shrinking and that executives are more skeptical of the value that can be achieved through “mega deals.” For instance, only 8 percent of respondents expect a merger of equals, and the vast majority (74 percent) expect their companies to acquire smaller players. In addition, M&A transactions are expected to provide less than 20 percent of overall company growth.

When asked to explain the main impetus behind their current or planned M&A transaction, more than half (54 percent) of the executives said that mergers and acquisitions are part of their ongoing growth strategy for value creation; about one-fourth (27 percent) said they need more growth than their core business can provide; and 10 percent said there is less opportunity to increase value through operational efficiencies. Other principal motivations behind M&A activity include realizing operational synergies, sharing risks and skills, countering takeover attempts, and tapping into emerging consumer markets.

“Businesses increasingly seek to drive growth through mergers and acquisitions because there are fewer perceived opportunities to increase operating efficiencies or grow organically,” said Ravi Chanmugam, a partner in Accenture’s Strategy & Business Architecture practice “However, we find that few companies have well-established post-merger integration processes that can capture value from their transactions and very few executives are measured on effective integration metrics.”

In other findings, half (51 percent) of respondents said they consider their most recent M&A activity a success. Only 14 percent of respondents said they did not consider it a success, and 35 percent said it was too early to tell. However, the definitions of success varied widely and the perceived value of most transactions is small.

For example, the greatest number of respondents — 58 percent — said they judge their M&A success by qualitative factors such as whether they achieved entry into new markets, rather than by more rigorous measures such as increasing free cash flow over the premium paid (9 percent) and an increase in the newly merged entity’s stock price (4 percent).

Further, fewer than half (48 percent) of executives said they have confidence in their company’s post-merger integration capabilities and processes, and only 37 percent indicated that executives in their organizations are measured against ongoing integration metrics.

“To be successful, acquirers must take a comprehensive approach to their transactions starting at the valuation stage,” Chanmugam said. “They need to consider all aspects of the integration challenge including core processes, IT systems, restructuring costs and the nuts and bolts of how integration really happens. If they can implement changes to systems and processes earlier, they will be better prepared to accelerate synergies and bring forward the value from their transactions.”

About the Study
The Accenture study was based on a global online survey conducted in May and June 2004 by the Economist Intelligence Unit (EIU) on behalf of Accenture. The EIU surveyed 109 senior executives with prior M&A experience in major corporations, the majority of which reported revenues of more than US$8 billion. Respondents hold a variety of different management positions, including chief executive officer, department manager, vice-president, line executive, regional manager, chairman and chief financial officer. Complete survey findings are available at www.accenture.com.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and technologies to help clients improve their performance. With approximately 95,000 people in 48 countries, the company generated net revenues of US$11.8 billion for the fiscal year ended Aug. 31, 2003. Its home page is www.accenture.com.