insight standardized deal teams tend to be both more experienced and more capable of realizing value that cuts across functions. Respondents who say that their companies don’t have standardized deal or integration teams most often cite functional skills as the factor to consider in standardizing team setups (Exhibit 5). Different functions, different perceptions CFOs’ views differ from those of other C-level executives on a number of topics we asked about in this survey. CFOs are much likelier to agree that M&A is important for their companies’ growth, that it’s important in consolidating their industries, and that their companies have a clear understanding of cultural strengths and weaknesses. CFOs are markedly less likely to agree that their companies are looking outside the core business for new ways to grow (40 percent of CFOs say that, compared with 51 percent of other C-level executives), that they have the right number of people and organizational resources to realize M&A aspirations (42 percent to 52 percent), or that they have the right quality of people and organizational resources (52 percent to 57 percent). Furthermore, CFOs expect their companies to do deals different from those cited by other senior executives: for example, they are more likely to expect their companies to focus on mediumsized deals and deals driven by market knowledge of which companies are undervalued (Exhibit 6). These differences may arise because CFOs are more connected to the financial rationale of any given deal than to the business rationale or because CFOs are more frequently brought in on larger deals.
Looking ahead • The results and our experience suggest that many companies have an opportunity to boost their chances of making successful deals if they formalize their approaches to M&A planning and integration and ensure that know-how is 46
CFO india
january 2012
Exhibit Exhibit 55
Considering skills in teams Considering skills in teams % of respondents, n = 82
% of respondents, n = 82 Factors respondent’s company should consider to standardise deal or integration teams
Factors respondent’s company should consider to standardize deal or integration teams Members’ functional specialties
52
Members’ functional specialties Pace of integration required
Value of the deal Members’ industry expertise
Overall size of team
Value of the deal Exhibit 6 Exhibit 6
32
Don’t know
10
Other Don’t know
18
11
8
Overall size of team 8
39 Other
32 18
11
Size of the other company
52
39
Pace of integration required Members’ industry expertise
Size of the other company
8 8
10
CFOs diverge on future deals deals CFOs diverge on future % of respondents,1 by job title
CFOs, n = 101
Focus of M&A activity at respondent’s company over the next 3 years
All other C-levels, n = 464
% of respondents,1 by job title
Focus M&A activity at respondent’s company over the next 3 years Acquiringof companies to add products, 51 48
intellectual property, capabilities, etc.
Acquiring companies to add products, Acquiring companies to incubate new intellectual property, capabilities, etc. businesses or enter new geographies Acquiring companies to bring scale
advantages to smaller businesses or add Acquiring companies to incubate new customers to existing businesses businesses or enter new geographies Medium-sized deals2
35
25 Acquiring companies to bring scale advantages to smaller businesses or add 33 customers to existing businesses Small deals worth less than $3 bn 33
1 Respondents who answered “don’t Medium-sized deals2 know” are not shown. 2
30 28
Joint ventures
46 41
Deals driven by51 market knowledge of48 which companies are undervalued
41 44
Large deals worth more than $3 bn 46
41
No deals
35
A n
Joint ventures 24 13
Deals driven by market 19 knowledge of 12 which companies are undervalued 14 17
Divestitures
41 44
C
Large deals worth more than $3 bn 3 6
Divestitures
25 10% of their companies' market cap and For the small deals, we asked public-company respondents about deals worth less than private-company respondents about deals worth less than 10% of their annual revenues, or, in either case, less than $3 bn. Medium-sized deals are worth 10% to 30% of either market cap (public companies) or revenues (private companies), and large deals are worth more than 30% of either market cap or revenues, or more than $3 bn.
Small deals worth less than $3 bn
33 33
No deals
broadly disseminated. Besides standardexecutives. Clear senior guidance is cruwho answered “don’t know” are not shown. izing teams and dedicating expertise, cial to successful transactions, so execu2For the small deals, we asked public-company respondents about deals worth less than 10% of their companies' mar the helpful actions we’ve seen include tive teams spend moreor,time private-company respondents about deals worth less than 10% ofshould their annual revenues, in either case, less than Medium-sized deals are worth 10% 30% of eitherbuilding market cap (public companies) or revenues building M&A playbooks and to tool kits, a shared understanding about(private companies) deals are worth more than 30% of either market cap or revenues, or more than $3 bn. as well as conducting a postmortem the role of M&A in executing strategies after each deal. and the types of M&A that organiza• It is critical for companies to retain tions should pursue. talent and manage cultural differences. The contributors to the development The results suggest that most compaand analysis of this survey include Robnies would benefit from examining ert Uhlaner, a director in McKinsey’s whether they have established the culSan Francisco office, and Andy West, a ture and structures to make the most of principal in the Boston office. the different skills, values, and insights available in acquired organizations. This article was originally • Given the increasingly common role published in McKinsey Quarof many CFOs as operators and strateterly, www.mckinseyquarterly. gists, it’s important to acknowledge and com. Copyright (c) 2011 McKinsey explore any differences between their & Company. All rights reserved. expectations and those of other C-level Reprinted by permission. 1 Respondents