NEW YORK; May 30, 2002 – Corporate executives are optimistic about companies’ willingness to participate in mergers and acquisitions this year, despite economic uncertainty and growing shareholder backlash to deals, according to an Accenture survey released today.
Almost 30 percent of the Fortune 1000 executives surveyed by Accenture, the world’s leading management consulting and technology services organization, said their companies’ appetite for mergers and acquisitions would increase during the next six months. More than 50 percent of those surveyed said this appetite would remain the same as the year before. Only 18 percent said it would decrease in 2002.
The survey also sought to identify the reasons for the success of mergers and acquisitions. While 86 percent of the executives surveyed said they are conducting rigorous pre-deal analyses, also known as strategic due diligence, half said poor identification of synergies and benefits between merging businesses are the primary reasons for the failure of M&A deals.
“Companies talk about the strategic rationale behind a deal but in reality, testing those hypotheses quickly gives way to discussions about deal structure and getting the deal done,” said Justin Jenk, partner in Accenture’s Strategy practice. “In other words, they focus on financial due diligence and historic data instead of focusing on future trends and the sources of future revenues.”
Mr. Jenk said strategic due diligence is fundamental to the success of any M&A deal, yet it appears that many companies fail to apply the appropriate resources and rigor to this aspect of transactions. According to the executives surveyed, 83 percent said they are not able to distinguish between the value levers of M&A deals.
Additionally, companies want to be diligent about both the strategy and execution of M&A deals, but not all companies can accomplish both. According to the survey, 11 percent of the executives surveyed said strategic integrity is the most important factor in accomplishing a successful merger or acquisition, while 20 percent said executional excellence is the key.
Accenture’s survey suggests that both are equally important. “Our analysis of specific industries leads us to conclude that those who understand that an effective strategy is as important as execution stand a better chance of succeeding in a deal,” Mr. Jenk said.
“True strategic due diligence requires companies to identify and test future value levers of deals prior to signing,” he said. “Acquirers should not only concentrate on past performance, but also be rigorous in their analysis of future sources of value for the combined companies.”
About the survey
Accenture conducted the survey in conjunction with Wirthlin Worldwide. Wirthlin’s periodic Executive Omnibus survey is designed to find out what the nation’s top corporate leaders think about the issues affecting business today. Executive Omnibus provides a comprehensive source of information about current attitudes of leading executives in Fortune 1000 companies, including CEOs, chairpersons, and executive vice presidents.
Wirthlin interviewed, by telephone, a representative sample of 150 of the leading executives in the Fortune 1000 in April 2002. A broad range of industries, services, locales, and sizes of companies are equally represented. Breakdowns of executive opinion by type of industry or service, geographic location, company size, level of executive and other variables help explain attitudes and behavior.
Accenture is the world’s leading management consulting and technology services organization. Through its network of businesses approach – in which the company enhances its consulting and outsourcing expertise through alliances, affiliated companies and other capabilities – Accenture delivers innovations that help clients across all industries quickly realize their visions. With more than 75,000 people in 47 countries, the company generated net revenues of $11.44 billion for the fiscal year ended August 31, 2001. Its home page is www.accenture.com.