Myth #1: "This Is a Merger of Equals."

There is no such thing! One of the most remembered of these so called mergers of equals was Mercedes merging with Chrysler. And who can forget AOL and Time Warner? It didn't take long for the "golden rule" to be invoked in that deal ("He who has the gold, rules!"). Don't fool yourself—an acquisition, by any other name, is still just that. In fact, another so called merger of equals, that of Smithkline and Glaxo, once executed, left Glaxo with a controlling interest in the newly formed Glaxo Smithkline.

While the term "merger of equals" has generally been applied to mergers involving large public companies, some of the negative consequences that can occur in a merger of "giant" equals can also take place in smaller deals. How so? In many cases, an acquisition, notwithstanding the legal side of the definition, is defined by the parties as a merger to soothe the egos of senior executives at the target company and to make the deal palatable to its management as well. However, once the deal is completed, history reminds us that there usually ensues a power struggle among the "new" merged company's senior management. When that happens, short and long-term deal value can be negatively impacted in many ways, including: post acquisition integration execution slows down; synergies are lost or mitigated, talented executives and managers with valuable tribal knowledge leave the new entity, product development and engineering efforts may slow (allowing for inroads by competitors); revenues fall, and sales force integration (and the servicing of both companies' client bases) may be severely impacted. The bottom line is a situation where the acquirer and "merged" target become increasingly less competitive while internal matters are sorted out.

The Maverick approach to M&A, that integrates operational and hands-on implementation as it concurrently identifies, assesses and addresses the potential people issues and corporate culture clash in your deal; The Firm's methodology can significantly reduce the possibility of a failed "merger of equals." Since Maverick works with you and senior management from the very start of your deal, the Firm can help you to identify the risks associated with modeling and executing your deal as a merger of equals.. The Firm can help your senior management assess potential targets to avoid any deals that are likely to diminish, rather than improve, your company's value in the short and long-term. And, when post acquisition people issues and culture clash problems do emerge, and they do in virtually every deal, Maverick is uniquely qualified to help you deal with them. Only Maverick's engagement methodology integrates the behavioral and management sciences across its broad functional practice area its practice areas.

Myth #2: "We can pay more than the deal is worth because the synergies will create huge cost savings"

Using the anticipated future cost savings from synergies to pay more than a deal is worth is perhaps one of the most hyped and disingenuous reasons for overpaying for a target. According to McKinsey, 70% of all acquisitions fail to achieve expected revenue forecasts! And stunningly, the same survey determined that greater than 25 percent of acquirers overestimated potential cost savings from synergies!

As you know, the synergies in question refer to the duplicated costs (between the merged companies) in back office functions, admin, legal, purchasing, R&D, manufacturing, etc., as well as field service and sales forces. But those vaunted synergies, once the deal is done, tend to be as elusive as pedestrians staying in the cross walks in NYC. Why is that? There are several reasons: in the early stages of a deal, optimism and irrational exuberance tend to overshadow realities; pressure on the due diligence team from the deal champion to squeeze out additional cost savings; and the cost of actually integrating the two companies' IT systems and other back office functions turns out to be far more expensive-and more time consuming than originally predicted.

The impact of exaggerating potential cost reductions from synergies goes way beyond delaying the anticipated improvement in the financial position of the merged companies. In fact, it is among the top reasons that many mergers and acquisitions actually depreciate the future value of the combined companies. How so? Significantly overestimating cost reductions from synergies, and using that rational to pay a higher premium for the target can cause severe financial strain across the entire enterprise post integration. If, for instance, additional operating capital was expected to become available as a direct result of the reduction in operating costs based on those projected savings from synergies, the enterprise could find itself strapped for cash. In any economy, but especially the current one, where bank borrowing is difficult, a reduction in operating capital could adversely affect every aspect of your business.

How can you help your company avoid falling into the category of those M&A deals that fail due to overestimating cost reductions due to synergy savings? The Maverick approach to acquisitions will help your M&A group-and especially your due diligence team look beyond the data room as you construct a viable financial picture of the target-and drill deeply into the potential for cost reductions that may be related to savings from synergies.

Because Maverick's M&A practice leader and teammates all have decades of hands-on deal experience-and include both finance and operating experts, they can act as guides with a transparency and objectivity that is hard to achieve internally. The Firm will be instrumental in helping your team flesh out the certainties from the unknowns; and provide or assist in the forecast of a realistic cost savings from synergies between your company and the target.

The Firm's unique engagement model is evidenced in the due diligence process; data rooms present only what the target wants you to see-or even what you think you want to see. But there's more than just the numbers and contracts-there are the people behind the numbers, the executives in charge of strategy and execution, and the people that do the work. Maverick's licensed, clinical psychologists-all PhD's with significant corporate experience, will ferret out details that you won't normally get on your own. They will work with their operational and finance counterparts to determine together, how much low hanging fruit there may be-and beyond that, the nature of the target's culture, and when possible, direct insight from planned and spontaneous meetings and interviews with the target's managers and executives that are critical to a successful integration of the two companies. This practice is only offered by Maverick-and it is woven throughout all Four Phases of the M&A process.

Before you're finished with Phase 2 of the M&A process, you'll have a realistic insight into the actual synergy savings that may be recognized from the deal in the short and long-term horizons. This information can then be used to your advantage, as you determine what you can afford to pay for the target, as well as to craft a set of T&C (terms and conditions) that will enable you to balance the deal based on many factors-including but not limited to savings based on predicted synergy related savings.

Myth #3: "We can deal with the corporate culture and people issues after we close the deal."

According to an article in the WSJ, of the 70% of deals that fail to reach their expected financial performance, 50% fail due to people issues and corporate culture clash. A study conducted by the University of Edinburgh Management School found that in corporate mergers where the acquiring company is aware that cultural differences exist, considerably higher shareholder value is created than in those where the acquiring company believes there are no such differences.

When it comes to most deals, the consensus among the majority of experts on the subject indicates that scant attention is paid to corporate culture and people issues until a deal is well underway-if at all. The fact is, more than ever, people issues and corporate culture matter to the eventual success of a deal and creating long-term value to the acquirer. To ignore the overwhelming evidence with regard to this crucial aspect of M&A is to do so at your own peril.

How can you and your company beat the odds relating to M&A failure due to people issues and culture clash? The best way is to engage Maverick; the only management consulting firm that provides M&A guidance and hands-on collaborative execution for its clients: and that has uniquely integrated the management and behavioral sciences into its entire functional practice, including mergers and acquisitions. Maverick calls this integration Behavioral Integration Management. ™

The Firm will help you, your senior management and HR to identify, assess and address the existing and potentially disruptive corporate culture and people issues between your company and those at the target. The Firm's behavioral practice is led by Dr. Martin D. Cohen, a licensed, PhD clinical psychologist with decades of corporate and M&A experience. Dr. Cohen and his team, all similarly credentialed, will begin their work at the earliest stages of Phase 1. This is an inclusive process that will touch every division, group, manager and employee in your company (and throughout the target as well, to help ensure that your company's acquisition efforts lead to the creation of long-term value; retention of key managers and employees; and the continuation of your company's historic values and an effective corporate culture..

Myth #4: "We don't need to pay for outside help. Our M&A group can do effective due diligence on the target and handle the rest of the 4 Phases of M&A as well.

In fact, many internal M&A teams do seem to do a pretty good job of due diligence. This, despite the fact that in most companies, even those with billions of dollars in revenue, much of the M&A team is pulled from an assortment of senior managers and vice presidents who are already working a "day job." As you can guess, this additional, and often crushing burden, doesn't do anything to help with these team members' focus on the due diligence process (or integration) and can lead to lapses in available resources, efficacy, and rushes to judgment. Moreover, very few due diligence team members are typically qualified to seek intelligence beyond the data room. This leaves a gaping hole in the information gathered, assessed and relied upon by first, the due diligence team, and then later, by senior management.

And so, the due diligence process, handled internally, may look pretty good, until you look at the M&A failure rate. If internal M&A teams do such a good job then why do so many companies consistently overestimate cost savings from synergies? This brings up two important questions: (i) why do so many acquirers underestimate the impact of culture clash and people issues-which are a significant cause of M&A failures; and, (ii) why do the M&A teams, and the executives they report to, so often overestimate the value of the target's products and services, or brand value, customer base, or any part of the prospective acquisition that looked so alluring during targeting?

The answers aren't simple-but some insight may be found in a McKinsey Quarterly survey of face to face interviews with 2,207 executives. Of these, only 28%said that the quality of strategic decisions in their companies was generally good, 60% thought that bad decisions were about as frequent as good ones, and the remaining 12% thought good decisions were altogether infrequent. Their candid conversations with senior executives behind closed doors reveal a similar unease with the quality of decision making and confirm the significant body of research indicating that cognitive biases affect the most important strategic decisions made by the smartest managers in the best companies. The result? Mergers routinely fail to deliver the expected values. Strategic plans often ignore competitive responses. And large investment projects are over budget and over time—over and over again. These failures, McKinsey found, were in large part due to human biases. So then, what can you do to help your company overcome these biases and ensure that there is as much objectivity and transparency as possible?

By hiring Maverick, you get resources that you just can't get internally: dedicated teams of experts with decades of hands-on acquisition experience- and perhaps more important than anything else, you get not only absolute objectivity-but also the Firm's unique engagement methodology which integrates its operating and finance experts with Maverick's PhD, licensed clinical psychologists. Led by Dr. Martin D. Cohen, the Firm's behavioral practice will work with you, your M&A team, and your senior management to help ensure that human biases, so common to M&A failure, are taken out of the equation.

When it comes to Due Diligence, Maverick goes far beyond the data room: when the situation allows for it, we interview the people behind the data-and those that set up the data room. With decades of M&A due diligence across hundreds of deals worth billions of dollars, the Firm has found that much of what needs to be known is only available by gaining the trust of the people responsible for either providing the information in the data room or those that actually produced the material. There is a great deal of strategy and preparation that goes into those interviews, and they are conducted by the Firm's licensed psychologists and assisted by their colleagues with operating and finance expertise. Creating and maintaining trust with the target's people is always at the forefront of the due diligence process.

Human biases also make it impossible to trust any firm that is rewarded for "closing a deal." Because Maverick's fees are not impacted by whether or not your company makes the decision to move forward with the deal, the Firm's advice is untainted, objective and without emotional investment in the deal. What you can count on from Maverick time and time again, is that it will speak truth to power: and it will do so discretely- and in a manner that protects the integrity of your office and those of senior management.

Myth #5: "We can do our own post acquisition integration."

In the best case, deal value can be lost like water going down a drain if inexperienced managers are charged with integrating an acquisition. For (internal) political reasons or sometimes out of necessity those are exactly the people who end up doing the post-acquisition integration in Phase 4 of M&A. Time, indecision, poor communication, lack of knowledge, poor process planning and coordination, poor strategic and operating decisions, along with a host of other issues can forever diminish-the added value-or even depreciate the value of the merged companies during the integration process in Phase 4. Another reason integration can dilute deal value (or worse) is due to the people involved having to do their "day jobs" in addition to the exhausting work of M&A integration-which is usually moves at a much accelerated rate-adding even more stress to the people doing "two jobs.." And, often times, these senior managers that have been assigned to the integration team and are working on different parts of the integration have misaligned agendas. Is it any wonder then that 70% of mergers fail to reach their expected financial performance?

Acquisition value can be lost in myriad ways before it even reaches the integration phase, including: (i) targeting errors, (ii) irrational exuberance with regard to projected cost savings from synergies, which often leads to paying too much for the deal, (iii) ego deals championed by the CEO or other senior management, (iv) poorly executed due diligence, and (v) lack of understanding about the target's culture and people.

By the time a poorly thought out deal reaches the integration team, there is tremendous pressure for the acquisition integration manager and the team- to make the deal work as planned by the deal champion. In the case of a bad deal, you can't make caviar from pigeon eggs simply by implementing the integration process well. Something has to give: in what usually happens is predictable: (i) salary cuts and/or bonuses and benefits; (ii) broader and deeper cuts to the head count at the merged companies than originally planned, and (iii) budgets are slashed across the board. And that's just for starters. By this time, morale in the merged company is so low, and anger and frustration with the acquirer's managers and executives is so palpable, that the best people—those with the knowledge and ability to get new jobs elsewhere, are going to do just that. The questions then, are (i) how can your company, having already expended a great deal of resources and money to get to the integration phase of a deal, retain as much long-term value as possible? And (ii), if the deal wasn't such a good one in the first place, what can be done during the integration process to create as much value as possible?

Maverick wrote the book on the Four Phases of M&A, and Phase 4, Post Acquisition Integration is where the Firm's hands-on, highly experienced and successful acquisition practice leader and consultants (all with decades of actual leadership and operational experience in M&A) can help lead or support your company's internal efforts. When you hire Maverick, you're not just getting a practice partner who then turns the nuts and bolts work over to a team of smart, albeit inexperienced twenty something's that recently earned their MBA's. At Maverick, everyone involved, from the practice leader to his team of consultants, is a former executive with decades of hands-on M&A experience across a matrix of deals with values from the tens of millions to billions of dollars. And we don't just do the work for your people: Maverick will help guide and mentor them so that they learn, relevant new skills that they can apply to future acquisition work within your company. Our play book for M&A leaves no process aspect of the Integration process untouched; and Maverick will also help you to uncover hidden value in your deal-as well as to hold on to value that might otherwise be lost due to an inefficient and ineffective post acquisition integration process.