Canadian M&A activity has continued to rise in 2017, but
with the successes come many more stories of failure.
Studies indicated that 70% – 90% of acquisitions
ultimately fail. How does a company beat these odds? A recent article by McKinsey & Company
suggests that companies who enter into acquisitions with a specific
value proposition in mind tend to have higher success rates than
those with vague, growth strategies. In particular, the authors
suggest most successful acquisitions implement one of six strategic
models.
Improve the target company's
performance
One acquisition strategy involves purchasing a target company to
reduce its costs and improve margins and cash flows. According to
McKinsey, many private-equity firms follow this model by buying,
improving and selling a target succinctly to achieve greater
increases in their operating-profit models. There is one caveat: a
company's ability to improve margins is influenced by how low
or high the target's
