M&A integration insights shared by insurance industry insiders
Key takeaways from the IASA annual conference
INSIGHT ARTICLE |
The topic of mergers and acquisitions (M&A) was a leading area of discussion at the annual Insurance Accounting and Systems Association (IASA) conference in June 2018. The event featured a number of other industry-relevant topics as well; however, given today’s low interest rate environment and the availability of capital, M&A was top of mind for many attendees. The panelists offered their perspectives on three different points of view involved in a typical M&A process: the acquirer’s, the acquiree’s and the auditor’s. Key takeaways related to these three areas included the following:
Due diligence helps determine the right fit. Researching opportunities and identifying potential targets is an arduous journey that can result in deals sometimes not being consummated. Due diligence is an extremely important part of the process as an acquirer leverages this strategy to find the right fit and right deal design. Rigorous buy-side due diligence can improve the odds of a successful merger or acquisition.
IT challenges jeopardize deals. The most common deal breaker involves the target acquisition undergoing an IT system overhaul. Mergers and acquisitions that go wrong can involve a large IT project that inevitably runs over budget and over time causing the integration to be long and painful. Smart buyers know due diligence doesn’t stop with the financial reports. IT due diligence is a must as well.
A central point of contact strengthens M&A process communication. It is important for the acquiree to have a centralized point of contact to oversee the merger or acquisition. This will reduce the chance of missed communications and misinterpretations.
Embrace change throughout the process. To ensure intended synergies are realized and cultural fit is achieved, the acquiree must recognize that changes are expected. An acquiree must embrace this change and actively seek ways to reach the desired outcomes.
Communicate early. Both acquirers and acquirees should bring in their advisors to meet with the auditor as soon as possible during a potential merger or acquisition. An auditor can provide perspective, key insurance industry knowledge and insight based upon previous experiences. In addition, the auditor can gain a better understanding of the transaction as it is occurring if brought in early during the M&A process.
Communicate frequently. Communicating with your auditor, for both acquirer and acquiree, frequently can improve the pre- and post-acquisition phases due to the resources and business relationships the auditor may bring to the table. With so many hazards that can derail a successful merger or acquisition, the auditor can be a valuable resource and provide relevant perspective throughout the process.
Insurance businesses routinely look to M&A as a growth strategy to expand into new markets, increase shareholder value, or even to realize tax benefits. When executed successfully, a merger can be a significant benefit to a company's bottom line; however, the majority of acquisitions fail to deliver on their expected value.
What can your insurance organization do to help ensure that your merger integration is successful? Read our white paper, Strategies for successful merger integration, to learn more.