{"id":9003,"date":"2021-04-07T07:01:30","date_gmt":"2021-04-07T12:01:30","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=9003"},"modified":"2021-04-06T14:45:15","modified_gmt":"2021-04-06T19:45:15","slug":"m-and-a-turnaround-strategy","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/m-and-a-turnaround-strategy\/","title":{"rendered":"M&A Turnaround Strategy"},"content":{"rendered":"

\"\"The impact of the global pandemic, volatile stock markets, and slowed economic outlook across the globe has hurt the performance of enterprises across the world.\u00a0 The scenario has forced leaders to consider undertaking Transformation<\/a> of their strategy and operations significantly.<\/p>\n

The strategy to buy out troubled businesses and determining to fix the issues that upset the target companies has been a focus of Buyers\u2019 senior leadership for the past 2 decades.\u00a0 In the year 2017 alone, 36,000 M&A (Mergers & Acquisitions)<\/a> transactions were announced globally. \u00a0Acquisition of troubled businesses hoping to have a Turnaround account for around 50% of all M&A deals.<\/p>\n

A Turnaround can be defined as the financial recovery of an economy or an organization after a period of inertia or Downturn.\u00a0 Several issues trigger a Downturn\u2014issues pertaining to technological disruption, regulations, processes, organization\u2019s financial health, management, business model, hierarchy, or competition.<\/p>\n

The ratio of success for M&As is, however, not very healthy. \u00a0Historical data of 61% of M&A deals based on a BCG\u2019s study, carried out on 1400 M&A deals globally between 2005 and 2018, shows a high failure rate (61%), where they remained unsuccessful to show any improvement in financial performance.<\/p>\n

The ones that do succeed offer significant revenue growth and profit margins\u2014around 25% positive variance in TSR than unsuccessful M&As.\u00a0 However, buying and fixing a business under the weather isn\u2019t an easy job.\u00a0 This necessitates a meticulous strategy.<\/p>\n

In order to materialize a Turnaround, the leadership needs to thoroughly understand the root cause(s) of the Downturn, have a willingness and plan to reform or transform, and rigorously implement the strategy to rectify the situation (Transformation Execution).<\/p>\n

Empirical Research demonstrates that the triumph of M&A Turnaround deals is attributable to 6 Critical Success Factors<\/a>:<\/p>\n