INTRODUCTION: THE OPPORTUNITY, THE PAIN, AND THE PROMISE

The normal failure rate of at least 50% in corporate M&A is unacceptable. Trillions of dollars are wasted every year in failed M&A deals that should never have been considered in the first place. This high failure rate destroys small and medium businesses, devalues big corporates, and ruins careers.

So why do so many highly educated, bright, and well-paid people spend so much time on corporate M&A when the outcome would be the same if they just flipped a coin? Why do so many students spend years at university, only to end up in a career where there is at most a 50% chance of success?1

This question has been bothering us for many years, as we struggled to understand how any CEO or any owner of a small or medium-sized enterprise (SME) could allow these high failure rates to stand. During Peter's corporate tenure at FrieslandCampina, there was not one single failed M&A transaction; no acquisition was ever regretted and every deal was reasonable in line with synergies set at the binding offer stage.

By this point, Peter had more than 25 years' experience working in corporate M&A (both buy-side and sell-side), and he realized that a pattern was starting to emerge. He began to interview M&A peers in companies which had a history of making close to 500 successful acquisitions, asking each one the same three questions:

• What are your business model drivers in M&A?
• What are your main processes?
• How have you managed to avoid the normal failure rate of at least 50%?

Their responses were illuminating, and confirmed his suspicion that there must be a formula for M&A success. A formula that will make the at least 50% failure rate a myth.

That M&A success was not just a matter of luck. It was down to the implementation of a formula that focused on the individual targets of each potential deal, involved the whole organization, and put in place a number of processes which could be carried out in-house to speed up each transaction.

This is the M&A Formula. It has been based on an exhaustive study, backed up with the academic research and real-world examples that you'll see in this book. This is the M&A Formula for success, which has been created, tested, and shared with you.

The M&A Formula

1. Follow business model-driven M&A.
2. Strong leadership and communication.
3. Take ownership.

The implementation of this formula is laid out in Figure I.1.

Figure I.1 The M&A Formula (see more on www.fixcorp.co)

Knowingly or unknowingly, this formula has been used by some of the most successful names in corporate M&A, creating their M&A success, and increasing value for their shareholders.

Through our research, we were able to find countless examples where deals have progressed thanks to the M&A Formula, and many more examples of deals that failed because they didn't take these three rules into the equation.

The three steps of the M&A Formula may not make sense to you right now, but this book will explain exactly what is involved at every stage, and what to do once you have run the formula and started making deals.

We will do this by using real-world examples and academic research, as well as anecdotes from Peter's own career. We hope that by sharing this formula, we can help to reduce the global M&A failure rates, and empower more businesses to use M&A to their advantage.

Here's why the formula presented in this book is so exciting. Whilst we reference large blue-chip corporates, the formula has been proven to work for businesses of all sizes, especially SMEs. So now you can skip the expensive trial-and-error process that has dashed so many M&A aspirations in the past, and embark on the growing of your business or career, armed with the know-how and tools that were only available to those with global wallets.

Why Do M&A?

Whether you are a CEO, an SME owner, an ambitious employee, or a hard-working student, you will know that if you aren't growing, you are falling behind, and the rate at which your universe is growing is accelerating. When deciding how to accelerate your corporate growth, you are faced with a choice to build or buy, and like never before, the choice is more often to buy because we will show you how to be successful in corporate M&A.

And it is a lot simpler than you think.

When Peter became Head of Corporate M&A at FrieslandCampina in 2011, he already had 25 years of corporate and investment banking experience. Yet he had never heard anyone explain in one short sentence why FrieslandCampina was actually doing M&A. He challenged the organization to come up with a simple statement in answer to the question: "Why do we do M&A?"

Peter himself grew up on a farm, in a farming family, and clearly understood what a high milk price meant to a farmer.

In this case, the milk price was just another way to define the return to shareholders-it could be return on equity (earnings per share according to Peter), but for the farmers who held the majority of shares in FrieslandCampina, the milk price was paramount.

When people make statements like "we could build a stronghold in South-East Africa" as a way of justifying a deal, this is not a business model driver. In other words, it's not going to increase the 'milk price' (aka your shareholder value).

Before any deal, you have to be able to stand up and state what's in it for the owner. Why do we do M&A? If you don't have a clear reason-a reason that will increase your 'milk price'-then you have probably just figured out why your M&A failure rate is so high.

High failure rates are likely to be an issue in global M&A for the foreseeable future, and it is these rates which will separate the great from the average. There is no international ranking for corporate M&A, but we do have industry data which clearly shows which companies are creating value for their shareholders in corporate M&A, and which ones may as well be flipping a coin.

In corporate M&A there is a lot of room for mediocre performance; after all, who will know? Meanwhile the external advisors will pocket some more money and by the time a deal starts to fail, it's too late to do anything about it, and the C-suite pays no matter how involved they were in the deal. This is why every business should take a hands-on approach to M&A developments, and you should treat every single deal as if your career (or your wallet) depends on it-because it just might!

This book will prove the importance of understanding and planning for M&A, regardless of whether you are the CEO or an intern. When everyone understands why they are doing M&A, all the pieces of the puzzle will start to fall into place and success will follow.

What Will You Learn From This Book?

In this book, we wish to share and explain the M&A Formula. The formula offers a route to M&A success, for any organization of any size.

First, an organization must clearly identify why M&A should be part of its business-this will involve identifying clear business model drivers. We call this 'Business Model-Driven M&A.' In this book, we will share Case Insights, which are relevant to each of the most common business model drivers in corporate M&A, and we will present global companies who were able to use these drivers to create M&A success. We will also show you Research Insights from some of the world's leading academics who evaluated these companies. These insights cover both global corporates and SMEs, and we were able to compare the firms and conclude that the formula for M&A success is the same.

Next, we will reveal how corporates of all sizes can further increase their chances of M&A success by creating a 'sense of belonging' in the organization-the importance of leadership and communication based on a clear mission: business model-driven M&A.

Finally, we will show you that the way to M&A success has to come from within the organization-by taking ownership of your own transaction instead of relying solely on external M&A advisors.

The first thing you have to do is to stop doing the wrong M&A deals. If there's one thing that is clear from our research and experience, it's that half of M&A success lies in the deals you don't do.

But you will never hear this from your closest M&A advisors. Just imagine what would happen to the total M&A fees earned by investment banks, legal advisors, and transaction service providers (e.g. accountants) if all companies stopped doing the wrong M&A deals.

External advisors cannot possibly solve the problem of high M&A failure rates, because they simply don't have a vested interest in saying no.

That doesn't mean that there's no place for external advisors in M&A-quite the contrary. But when it comes to lowering failure rates, the change needs to come from within.

You have to have that moment of transformation, where you decide to use M&A for success.

After all, it is your company at stake here. What CEO would want to make any M&A-related decisions if the expected outcome was worse than a...