The future of the deal

M&A Leadership Series

Clear views from the top | Issue 1 – September 2017
Welcome to
the first issue of the
M&A Leadership Series

Contents
About the M&A Leadership Series Executive summary 01
Welcome to the first issue of the M&A Leadership Series. We’re bringing heads of
M&A from corporate Australia together with our leading Deloitte experts into one community. Profile of our survey respondents 05

Our intention is, through this community, to create a platform for senior corporate M&A leaders to Trends and triggers 07
network, share insights and discuss key business, economic and technological trends and outlooks
for the M&A lifecycle. We’ll also have a particular emphasis on how to improve outcomes and Driving strategies for growth 11
maximise value through the deal.
Shaping business for the future 17
This information is compiled from face to face interviews with business leaders involved in M&A
and insights gathered from global Deloitte research, Deloitte Access Economics and the views of The deal promise 21
the leading experts in our Australia M&A practice.
Contacts 25

References 26
 The future of the deal: M&A Leadership Series
Executive
summary
Leading M&A is one of the most
rewarding, yet demanding challenges
in corporate Australia. The cycle of
work is difficult to predict in advance
and expectations for value creation
from deals are high, and getting higher.
On top of this, add the challenges of
political, global and economic instability,
and the resulting uncertainty and lack
of predictability of markets. To better
prepare Australian M&A leaders to deal
with these mounting pressures, we want
to improve the quality of information
and actionable insights available.
Clare Harding
This is why we have launched the
Deloitte Partner
Leadership Series to serve the unmet
Managing Partner, Financial Advisory
needs of M&A leaders in Australia.
This first report, based on a survey of
M&A leaders, brings together collective
perspectives of key success factors in
executing a transaction, challenges faced,
market activity expectations, and insights
from some of our foremost global and
local thinkers. Our aim, ultimately, is to
enhance the prospects and growth profile
achieved through M&A for senior leaders
and corporates in Australia.
Within Australia, weak local
consumer demand, rising house prices
and stagnating wages have contributed
to a situation where some businesses
have struggled to grow organically.
Disruption from new entrants and
subdued consumer spending have
resulted in markets facing increasing
competition, impacting margins.
01
From transformational mergers with synergies,
acquiring new business models to become the
disruptor or divestitures of businesses being
disrupted, there’s a lot happening in M&A.
Increasingly, companies are adopting
inorganic growth strategies to create
‘businesses of tomorrow’.
• 75% of the leaders we spoke to in
our survey agreed that M&A is a
critical enabler for them to deliver
on their corporate strategy and growth
ambitions. And M&A will continue to be
a central pillar of growth activity.
• Over 60% of M&A leaders surveyed
expect their organisation to be
involved in an increased number of
transactions over the next 12 months.
• To deliver on this, corporates have
invested in their teams.
• Most leaders are considering:
– Cross-border investments,
with South East Asia and North
America considered the most
attractive regions
– Alternative structures such
as joint ventures
– Partnering with private equity.
• While organisations are using M&A
as a strategy to chase growth, they
are also using it as a tool to shape
their businesses – trying to remain
competitive in rapidly evolving markets.
• This includes divesting themselves of
non-core assets, or those parts of the
business with limited growth potential.
Clear views from the top | Issue 1 – September 2017
With an increase in the number and size Read on for some detailed findings
of deals and the importance of M&A as a from our survey under four key themes:
contributor to growth, it’s no surprise that • Trends and triggers – the market
organisations are also focused on having outlook – what are the key drivers for
the right capabilities to both execute and M&A trends?
deliver on the promise of deals.
• Driving strategies for growth –
M&A is taking centre stage as an enabler
From the survey results, we’ve
of growth – is this a good development?
identified three key opportunities
in achieving a successful transaction: • Shaping business for the future –
divestitures are a major focus at the
• Increasing the level of investigation
moment – but has the motivation
by using analytics during a transaction
behind them changed?
to further inform decisions and
confidence • The deal promise – the pressure is
on for deals to deliver better value –
• Adequately addressing culture and
how can this happen?
people issues
• Undertaking early and detailed
functional planning to effectively
integrate and deliver deal value.
Where relevant throughout this report, we
have compared our Australian findings to
similar surveys from Deloitte US, to give a
global picture. We also have a special pull-
out section where we dive into one of the
hot topics in M&A. This issue focuses
on the advantages of employing data
analytics in the context of a transaction –
M&A analytics.
02
 Clear views from the top | Issue 1 – September 2017

80%
consider cross-border investments
with South East Asia and North America
to be the most attractive.

60%
confirmed a
divestment of
non-core assets
to be a priority
expect their
for them in the
organisation to
shorter term.
be involved in an

55%
increased number
of transactions over
the next 12 months.

50%
are starting to see the benefits
of the use of data analytics in M&A.

Culture and people

issues and a lack of detailed
planning continue to be two

75%
major concerns in delivering
the deal value.

of respondents agree that M&A is a critical enabler for

them to deliver on their corporate strategy and growth ambitions
04
 The future of the deal: M&A Leadership Series

Profile of our
survey respondents
30 heads of M&A from Australian ASX100 companies
have shared their views and outlook for M&A.

6 sectors are represented in this survey:

financial services, telecommunications and media,
consumer business, engineering and construction
services, energy and resources and healthcare.

5+ is the number of successful M&A transactions

pursued by 70% of respondents in CY2016.

3+ is the number of transactions successfully closed

by 30% of respondents.

5-15 is the average size of the dedicated

internal M&A teams that all respondents have.

05
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

Trends and Our survey findings

The market for M&A transactions
triggers
in Australia is definitely positive. Over
the next 12 months, almost all survey
respondents expect deal activity to
remain at least at the same levels as
2016 in Australia.
This is similar to sentiment in the US
market, where according to a Deloitte
US survey, 75% of respondents expect
an increase in deal activity.
Chart 1
Are you expecting the number of deals that your organisation
sees or pursues to increase or decrease over the coming 12 months?
Some of the drivers for the
expected increase in transactions
Consistent with overall expectations for increased deal
activity, 60% surveyed expect their own organisation
in Australia include:
• Low underlying market growth to be involved in an increased number of transactions
across most industries
over the coming 12 months.
• An expected increase of private equity
interest in their respective industry
(70% of respondents)
Chart 2 About 55% consider a divestment
• Access to capital markets
Percentage seeing any constraints in of non-core assets a priority for their
(97% of respondents)
the capital markets now or in the future organisation. Divestitures are also a major
• Changes to the regulatory environment
focus for US firms, with 73% saying they
• Reshaping strategy for allocation
plan to sell businesses in 2017. Our view
of capital.
is the increase in divestitures is a sign of
companies wishing to consolidate growth
81 by focusing on core assets, rather than the
need for balance sheet repair or de-risking
(which was a driver a few years ago).

No change 37
“Improved operating
Decrease 7
19 efficiencies in corporations
have generated significant
Increase 57 cash, cash that will find
Yes
No its way into M&A. And
0 30 60%
Source: Deloitte Australia M&A Leadership private equity fundraising
Source: Deloitte Australia M&A Leadership Series survey Series survey
continues unabated.”

Source: Global Deloitte M&A research

07 08
Organisations have the right
teams and the right strategy
in place and are a lot more
attuned to opportunities.
Tony Garrett
Deloitte Partner
M&A, Corporate Finance Advisory
09
Our
take
Momentum is building,
but decision time is coming
“M&A in Australia is on an uptick,
but it’s a gradual build, rather than
a dramatic upswing. We’ve had a lot
of IPO and private equity activity in
recent years, and it feels to me like our
corporates, as a result, are well positioned.
They’ve had the cash on hand for a long
time. Most have been building their
in-house capabilities.
Now the right teams are there, the
strategy is in place, they know who they
want to acquire and they are a lot more
attuned to opportunities.
There is plenty for these teams to
think about. From transformational
mergers with synergies, acquiring
new business models to become the
disruptor or divestitures of businesses
being disrupted.
Corporate advisors in Australia are really
putting rubber on the road to bring good
ideas to their clients.
Joint ventures and increased
interest in private equity is definitely
a trend we’re seeing, but corporates
want potential partners to bring more
to the table than just capital – it’s about
expertise, relationships and clear ideas
for how to exit down the track. Interest
from overseas is significant, because our
assets are considerably cheaper than in
Europe and North America. However, this
increased trend, combined with business
globalisation, means its decision time for
Australian corporates. Do they want to
progress and become large companies?
Or stay as they are – large small
companies? “
10
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

Driving “We have looked at offshore investments but they

are tough and risky; if we did expand, we would look to
strategies South East Asia where there are existing operations.”

for growth Source: Deloitte Australia M&A Leadership Series survey

Our survey findings
M&A is a central part of growth
strategies for most of the organisations
surveyed. In Australia, organic growth has
been hard to come by in recent years with
markets facing increasing competition
which is holding or depressing margins,
disruption from new entrants and
subdued consumer spending.
Overall, average industry income growth
decreased from 7.7% in 2010 to an annual
average growth of 2.5% over the last five
years – hardly surpassing inflation.
Corporates as a result are looking for
growth through acquisitions. Increasingly,
companies are adopting inorganic growth
strategies to create ‘businesses of
tomorrow’ through M&A.
In fact the most recent edition of our 75% of Australian respondents agree that
US/UK Deal Monitor found that for many M&A is a critical enabler to deliver on their
companies, M&A is no longer a second corporate strategy and growth ambitions.
best to organic growth – it is now the
primary growth strategy in business.
Chart 4
How much consideration is given to M&A as an
enabler of the corporate strategy at your organisation?

Chart 3
Critical 73
Total industry income growth financial years 2008-2016
Important 23
9%
8.2
Somewhat 3

0 40 80%

Source: Deloitte Australia M&A Leadership Series survey

Cross border M&A

0.4 GFC
0 As companies seek increased Three key themes
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 competitiveness and growth in new
geographies, cross-border M&A has in cross-border M&A:
Annual income growth
emerged as one way to quickly gain new 1. Stronger appetite for cross-border M&A in key deal
Recent period of depressed growth – hardly beating inflation
market and customer access. In fact, 2015 corridors is primarily driven by revenue growth and
Source: Australian Bureau of Statistics cat.8155 saw the most cross-border deals to date access to new products and channels.
in any given year.
2. Commercial and operational diligence, along with a
thorough understanding of tax, regulatory and political
To deliver accelerated growth,
“M&A will be a key enabler in order to achieve our future around 80% of respondents consider
risks, are imperative to cross-border deal success.

growth objectives.” cross-border investments as part of their 3. Integrating pre-deal due diligence with pre-close
planning activities to prevent hand-off misses, defining
acquisition strategies. South East Asia and
North America are considered the most the overall integration approach, and planning for
Source: Deloitte Australia M&A Leadership Series survey attractive regions to invest in. In the US, achieving both legal close and end-state goals are
this percentage is also high, at more than all critical.
90%. The focus of US companies is on
five key regions; Canada, UK, China,
Japan and Europe.

11 12
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

Alternative structures
When exploring growth opportunities,
82% of respondents consider alternative
structures such as joint ventures or
partnering with private equity.

Chart 5 Chart 6 Respondents signalled that
Percentage approached Percentage that would consider experience and network were key
by private equity firms a partnership with a PE firm contributors in their consideration to
partner with private equity. Regarding
access to capital, alignment of objectives
(i.e. the investment horizon, strategy etc.)
was considered to be most important.
83 77 Interaction with private equity is also
becoming more prevalent and the
willingness to partner with private
equity is there, particularly where:
• There is a geographic or industry
capability that complements the
17 23
corporate
• The private equity firm can bring
greater change management capability
Yes Yes • The private equity firm can provide an
No No alternative funding source on larger
Source: Deloitte Australia M&A Leadership Source: Deloitte Australia M&A Leadership transactions.
Series survey Series survey
Chart 7 Joint ventures typically offer the following
Percentage open to joint advantages:
venture partnerships • Access to resources and markets
that are otherwise unavailable
• Limited upfront investment
• Risk mitigation through partnership
80 Expedited time to market
• New path to an exit, through IPO
or sale of shares.
In Australia our survey reveals that,
typically, joint ventures are considered
20
to provide access to relevant networks
and relationships and/or specific
capabilities and expertise. Organisations
are more prepared to enter into joint
Yes
venture relationships where there is
No
strategic alignment.
Source: Deloitte Australia M&A Leadership
Series survey

“We would consider partnering with private

equity if we would clearly benefit from the capabilities 7 steps to successful joint ventures
(e.g. turnaround) and/or specific knowledge they bring 1. Define clear strategic objectives
2. Select the right partners
(e.g. new markets, segments).”
3. Define the value of JV contributions
4. Define the JV structure and operating model
Source: Deloitte Australia M&A Leadership Series survey 5. Appoint a strong, aligned JV team
6. Establish a performance management structure
7. Plan for change and exit options.

13 14
M&A can be part of a growth
strategy, but those relying on
it completely are in trouble.
Our
take
Adrian Gazzard Growth is hard, but not impossible
Monitor Deloitte Partner “It would be remiss to exclude M&A as
Corporate Strategy an option for growth – making portfolio
choices is a crucial part of this – but M&A
cannot be the whole plan. Corporates
need multiple pathways to growth, of
which M&A can be one.
15
Businesses for the past 5-10
years have been focused internally.
The impacts of, for example, the
global financial crisis (GFC), disruption,
changing business models, have
required significant transformation.
Perhaps if the GFC had been an actual
crisis here, more drastic transformation
would have happened. This inward focus
has resulted in companies taking their
eyes off the ball on growth.
I expect the coming years to have a
much bigger focus on growth. I agree to
a certain extent that organic growth has
been harder to come by. However, savvy
businesses will recognise that, even in
lean times, there are a few players in
every category that achieve growth. Who
will grow often comes down to the player
who has the greater insights into the
fundamentals of their category, through
data or other tools, and the rigour and
drive to apply these insights.”
16
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

“M&A will be a key enabler for us to

achieve our future growth objectives.”

Source: Deloitte Australia M&A Leadership Series survey

Shaping Our survey findings

Divestitures are big news. We consider
business
this to be a natural part of companies
choosing to focus on core assets and
strengthen their business models. 66%
Globally, there has been a sharp and
continuing increase in M&A deals done
with the primary purpose of acquiring
capabilities or technologies across key
disruptive innovation categories (fintech,
Interestingly the days of balance
sheet repair appear to be over, with no
Scenario planning to create
corporate identifying this as one of the
key reasons for a divestment. diversified or advantaged portfolios

for the
of respondents consider a divestiture as
likely to happen in the next 12 months.
AI, robotics and others). Businesses may
be divesting themselves of non-core
The most recent report in our Building the Lucky
The majority of respondents stated
Country series – What’s over the horizon? Recognising
they regularly review their portfolio to
opportunity in uncertainty – looked at the importance

future
Divestitures are also a key trend overseas, assets to prepare for the need to invest identify non-core assets, and they are
of forecasting and scenario planning for businesses.
with 73% of respondents to the US survey in data or technology capabilities, to more opportunistic as to the timing of a
One of the areas we focused on was the role that good
planning to sell units or assets in 2017. capture disruptive growth opportunities. possible divestiture.
scenario planning can play in creating an advantaged
This is up from 48% mid-way through This is also happening in the Australian
portfolio for your business.
last year and 31% in 2015. market, but it’s driving deal volume For Australian M&A teams, the top
rather than value. three concerns in preparing an asset
One of the central objectives of strategy is for leaders to
for divestment are:
think holistically about a company’s portfolio of businesses.
All respondents indicated they are • Representation of standalone Doing this allows leaders to plan and execute ways to make
regularly reviewing their portfolio financial performance the aggregate value of a company’s holdings durable over
of assets in conjunction with their
• Overall assessment of value time, and greater than the sum of its parts. This vital
executive management teams.
and upside potential responsibility comprises two central questions:
Chart 8 • Level of complexity involved • Which businesses should we participate in?
Top reasons to consider divestitures in separating the business. • How do we create value within and across
our businesses?
Other 20
Factors that create separation
complexities include: The most successful portfolios exhibit three broad
Lack of/no capability to • Operational dependencies of characteristics: they are strategically sound, value
37
grow the business the asset to be sold and remaining creating, and resilient. Yet companies seldom achieve
business all three, because doing so requires leaders to carefully
Unsolicited offer 17 • Sales readiness of the asset consider and test their portfolio across a wide range of
in scope for divestment attributes, which is highly complex.

Financing needs 17 • Length and duration of a

The use of scenario analysis is essential to
potential divestment process
evaluating whether or not your portfolio will give you
• Distraction of management from
Market change 33 a competitively advantaged position in the market. Not
business as usual and the level
surprisingly, developing an advantaged portfolio is more
of stranded costs to consider.
about creativity and optimisation than it is about applying
Non-core asset 70 a straight calculation or logical algorithm. It requires
In a low growth environment, corporates
evaluating a range of options through a wide array of
are reluctant to sell off a major business
0 40 80% lenses, as well as analysing both individual business
if there’s nothing immediately available to
and total portfolio effects.
Source: Deloitte Australia M&A Leadership Series survey replace it. It will be interesting to see how
Note: graph does not add up to 100% due to respondents being able to select multiple responses. this progresses in the coming year.

17 18
The increase in divestitures
we’re seeing is primarily
related to shaping the
business for future growth.
Our
take
Jamie Irving Divestitures, but
Deloitte Partner not as we know them
M&A, Transaction Services “We’re seeing organisations investing
in M&A as a strategy and building M&A
teams as a platform for them to shape the
business for future growth. This is a global
trend. This means identifying businesses
that are no longer core and exploring exit
options while concurrently identifying
strategic acquisition targets to underpin
future growth.
19
The increase in divestitures we’re
seeing is primarily related to shaping the
business for future growth opportunities
but also making sure that management
isn’t distracted by businesses that are
not generating the same returns as the
core business. Executives need to be able
to articulate a clear strategic narrative
of their focus to positively engage the
investment community.
We’re moving from reactionary, necessary
divestitures where the primary purpose
was balance sheet repair, to strategic and
planned ones. In turn, this recovery should
mean that Australian corporate balance
sheets are in a much healthier position
and can look for opportunities. But we
know this has been slow to happen.
On the acquisition side, it seems the M&A is a competitive process and
‘cash paradox’ we revealed a few years often corporates are outmanoeuvred
ago continues to linger. Despite our for desirable targets by private equity
analysis showing corporates who use firms who can move fast and respond
their cash reserves to pursue inorganic more quickly.”
growth perform three times better than
those who hoard their cash, reserves
remain high in Australian ASX companies.
Why isn’t this changing? Corporates tell
us that primarily, it’s the lack of availability
of desired targets. Another factor is risk
appetite – boards have in many cases
been very cautious given the volatility
in the markets. Which leads to the
third factor – lack of speed and quick
decision-making.
20
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

“A trail of underperforming past The role of the board in

transactions has meant that the board post-merger integration
is sceptical of the value that can be
The deal
Boards can play a crucial role in helping their
companies succeed by providing an oversight role on
added by any transactions proposed.” integration planning and execution – similar to the role

promise
the board often plays in its business-as-usual tasks:
asking questions, identifying areas of risk, and providing
Source: Deloitte Australia heads of M&A survey
guidance on solving problems.

Our survey findings
Numerous studies carried out
by Deloitte and other organisations
globally show a significant amount
of M&A transactions falling short of
attaining their anticipated return on
investment, and in some cases, not
delivering any upside at all. Naturally
this is an area of major concern for
Australian M&A experts too. 84% of
respondents agree that both integration
and separation concerns are prominent
when they consider a transaction.
Focus on people matters and cultural
fit are considered to be a key enabler
for driving successful outcomes.
Chart 9
Top concerns in achieving a successful transaction
One critical, often underestimated
contributory factor to the success
of a deal is post-merger integration
– the events that unfold after a deal
is agreed and signed. Integration
planning is considered to be important
by all Australian respondents. The most
important functions considered during
integration planning are finance,
operations and IT. This tallies with
US results, where integration planning
is the number one factor in ensuring
that deals deliver the expected benefits.
We expect corporate buyers to pay
even more attention to integration, as ever
higher prices narrow the margin for error.
Post merger
integration
But our survey results indicate that
this important part of the transaction
is often not resourced adequately.
The majority of respondents have a
dedicated M&A team consisting of
5-15 members, working across the
M&A lifecycle, but a dedicated post-
merger integration capability is the
least represented skillset.
Chart 10
What capabilities are represented in your M&A team?
The board’s role in the M&A process should be one
of oversight, as a matter of corporate governance.
Boards should work with management to oversee all
aspects of the M&A lifespan: due diligence, valuation,
final deal terms, day one readiness, and post-merger
integration.
Directors should ideally oversee the post-merger
integration, to help ensure that a plan is established,
regularly evaluate it and hold management accountable
for its implementation.
63

Due diligence 87
Cultural/people issues 53

Inability to deliver
Execute 90
anticipated value 60
Originate 83
Failure to effectively
47
integrate

Insufficient 0 50 100%
23
identification
Source: Deloitte Australia M&A Leadership Series survey
Note: graph does not add up to 100% due to respondents being able to select multiple responses.
Inaccurate valuation 23

Improper target
10
identification Skills needed for M&A Deloitte colleagues in the UK have
Leading M&A demands a portfolio conducted interviews with several heads
Economic uncertainty 13 of talents. There is no single critical of M&A on the skillsets needed. They agree
qualification or skill – and that implies that team building and skill building within
Changing regulatory a challenge when it comes to recruiting. the M&A function happens as a matter
33 of exchange, and learning by doing. Their
landscape Our respondents identified the key
priorities for a leader in M&A in Australia insights include that no one is an expert
0 35 70% as: set a clear strategy and direction; on all aspects of M&A. The biggest learning
move quickly and decide with speed; comes from doing the job. They are agreed
Source: Deloitte Australia M&A Leadership Series survey
transparent and direct communications. that the most important skill set needed
Note: graph does not add up to 100% due to respondents being able to select multiple responses.
is the ability to think. You have to think
through all the scenarios.

21 22
As mergers become more
complicated, people and
culture issues will continue to
hinder post-deal integrations.
Robert Arvai
Deloitte Partner
M&A, Integration and Separation
23
Our
take
How to solve post-merger
integration issues? Get the ‘people
experts’ around the deal table
“If we think of the learnings after any
typical deal – the things that go well and
the things that could have gone better –
we see a pattern. Things that go well are
usually both tangible and time bound
– such as legal aspects, procurement
and synergy identification. And things
that could be improved on are the
more complicated, ‘softer’ aspects like
the cultural profile of an organisation
– management style, HR processes,
and loss of senior people.
Why is this? The simple fact is these
issues are difficult. Usually deals are driven
by the CEO, CFO and the executive, whose
focus is on their time bound issues. The
people with the expertise to look at the
softer, people-based issues are often not
around the table at the right time to plan
to prevent them. It’s a difficult problem to
solve, but not impossible. The first step for
executives is to get some facts around the
issue, including mapping the culture of the
organisation, looking at how decisions are
made. Data analytics can also play a role
in identifying demographics and mapping
the structures of the organisation.
With some understanding in place,
a plan can be put together. Ahead of
day one, it’s critical to plan the workforce
transition well and manage critical cultural
norms. And don’t underestimate the costs
of integration, which our research shows
can range between 1.75% to 3.35% of
enterprise deal value in Australia.
As mergers become more complicated,
companies become more complex and
cross-border deals become more common,
people and culture issues will continue
to stymie post-deal integrations, unless
they are included in pre-deal planning
and solutions are resourced afterwards.”
24
 The future of the deal: M&A Leadership Series Clear views from the top | Issue 1 – September 2017

Contacts References
For more information or any questions on this publication, We drew on several excellent pieces of research and
Deloitte’s M&A services or the M&A Leadership Series contact: insight from colleagues in the Deloitte M&A team globally
for information, inspiration and global comparisons.
Robert Arvai Rob McConnel Below are some of those publications.
Partner Partner
M&A, Integration and Separation M&A, Valuations Deloitte US and UK M&A Deal Monitor
+61 408 050 759 +61 439 470 037 Deloitte Global M&A Index 2017
rarvai@deloitte.com.au robmcconnel@deloitte.com.au
Deloitte Australia: The Australian Cash Paradox

Tony Garrett Ashley Miller Deloitte US: Utilising data analytics in post-deal integration
Partner Partner Deloitte US: Joint venture and alternative structure transactions:
M&A, Corporate Finance Advisory M&A, Transaction Services Getting them right from the start
+61 419 773 365 +61 417 596 459 Deloitte US On the board’s agenda | Post-merger integration
tgarrett@deloitte.com.au asmiller@deloitte.com.au

Jamie Irving Nicki Ivory

Partner Partner
M&A, Transaction Services M&A, Valuations
+61 400 331 266 +61 422 024 597
jirving@deloitte.com.au nivory@deloitte.com.au

Wouter Timmer Thanks to many colleagues for their

Partner contribution to this edition, including:
M&A, Integration and Separation Adrian Gazzard, Kurt Heppner,
+61 406 602 110 Kristian Kolding, Ben Nugent
wotimmer@deloitte.com.au and Louise Kelly.

Ian Turner
Partner
M&A, Transaction Services
+61 410 045 633
iaturner@deloitte.com.au

25 26
Focus on:
M&A Analytics

Data analytics in M&A

Where do Australian M&A leaders
seek to embed analytics capabilities
in the M&A process?
Due diligence

Synergy
validation 25

14
Divestiture

8
14
Integration

25
Execution 14

Strategy
Development

Source: Deloitte Australia M&A Leadership Series survey


Our survey findings
Deploying M&A Analytics allows acquirers or sellers to quickly build
a fact set about a business using data that historically has not been
interrogated during an M&A process due to cost & time constraints.
50% of all respondents do not use analytics in any part of
their transaction approach. This is compared to the US, where two-
thirds of corporate leaders use data analytics and 64 percent say
they have increased their use of analytics significantly or somewhat.
US respondents are using data analytics primarily in analysing
customers and markets, and workforce/compensation issues.
When Australian corporates use data analytics, our survey indicates
it is applied evenly across the various stages of the M&A lifecycle.
Data analytics in action – a case study
Tools like iDeal, the Deloitte M&A analytics solution, give clients the insights
necessary to validate deal value drivers. For example, on an acquisition due
diligence project on a complex TMT target, we conducted a complete build
of the target’s historical revenue profile by individual customer, product, and
channel. The data model contained in excess of 20 million records and allowed
us to answer key questions on the sustainability of historical revenue growth,
customer churn and quantify the shift in product mix over previous five years.
The output of this analysis was presented through interactive dashboards
that aggregated information to high level trends, but allowed for detailed
drill down into drivers of these trends. Ultimately the use of iDeal provided
our client with confidence in the underlying business and in their bid price
based on forecast EBITDA.
“We don’t use data analytics enough
– partly through lack of capability and
partly culture. A lot of our decisions are
made on gut.”
Source: Deloitte Australia M&A Leadership Series survey
How data analytics can
be used in the M&A process
Understanding the customer
A deep dive into the data can help understand the customer
proposition, including frequency of interactions, stickiness,
average spend, churn, customer profiles and catchment.
Understanding the workforce
Using analytics to better understand the target’s workforce
and compensation structure and helping to reveal critical
demographic features, patterns of employment, and potential
risk factors helps deal makers to understand the talent as
an asset of any organisation.
Analysing cultural compatibility
While deep data will not reveal whether two corporate
cultures will clash, they can often reveal if the ratio of
managers to employees is out of proportion, or if the
compensation structure of either firm is far different
than the other.
Blending target, company and third party datasets
Target data can be blended with acquirer data to form a view
on future merged entity in areas such as suppliers, customers
and locations. Analytics also allows for third party data to
overlay with target data to help corroborate deal hypothesis.
For example, the use of geo-demographic datasets to validate
customer traits.
Getting data analytics
right in a deal can give
an invaluable edge

Our take
Kurt Heppner
Deloitte Partner
M&A Analytics

Asking the right questions to dive into data

“What’s the number one reason up to 50% of Australian
corporates are not using data analytics to enhance their M&A
transactions? Organisations have been presuming that any
request to access data as part of an M&A transaction will
be refused. However, that’s an outdated assumption. Most
companies have sophisticated enough systems in place
to allow easy access to de-identified data.

For M&A teams, it’s about knowing, first, to ask the question,
and second, knowing what to ask for in terms of access to data.
The next step after getting access to the data? Getting the right
people in your team to make the best use of it.

The best approach is to bring people with deep industry and

commercial M&A knowledge, together with the newer skills of
data scientists, and data and business intelligence analysts.
But be aware that people with both skills sets are still in the
unicorn category – special and rare!

Getting data analytics right in a deal can give an invaluable edge.

And the advantages don’t stop when the deal is done. Getting the
data right before the deal, means that acquirers can continue to
received real-time data and insightful analysis post-deal, to track
if the deal is performing close to expectations.”
For further information, please visit
www2.deloitte.com/au and search ‘mergers and acquisitions’

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