Esteemed mergers and acquisitions expert visited Aalto
Ted Rouse has been working in the Bain & Company consulting firm since 1982 and has been a partner since 1988. He led Bain’s global corporate mergers and acquisitions practice from 2005 to 2014 and was a member of the company’s board for over 6 years.
Rouse holds an MBA from Harvard Business School, and his articles have been published in Harvard Business Review, MIT Sloan Management Review, and The Wall Street Journal.
Bain has studied what kinds of mergers and acquisitions transactions create the most value. What common factors are behind successful deals?
‘We have asked our clients what factors have influenced particularly successful and value-producing deals. The three most frequently mentioned factors are a clear acquisition thesis, a clear connection between the investment and the company’s strategy, and a high-quality due diligence process – meaning the examination of the target company’s situation carefully before entering into a transaction.’
‘We have also studied larger corporate acquisitions over a ten-year period. It showed that transactions are an acquired skill: companies that completed one or more deals per year created more value for their shareholders.’
What does a corporate acquisition thesis mean and what does it entail?
‘A corporate acquisition thesis justifies why the deal is being made – why the entity believes the acquisition will add value and how the deal strengthens the company’s strategy. It describes tangible, measurable benefits, such as the costs and returns of the deal, competitive advantage, or improved revenue-generating capability. It also outlines the few key things that need to be done correctly for the acquisition’s benefits to be realized.’
‘We address integrated due diligence, where the strategic position of the company, organizational culture, and management skills are also examined. One should not rely solely on the information provided by the target company; you can, for example, investigate the market situation, interview customers, or study the management’s LinkedIn profiles.’
What are the pitfalls during the integration phase of corporate mergers?
‘A successful takeover requires its own integration thesis, which links to the corporate acquisition thesis. Integration should focus on strategically important aspects and not merge functions one by one. There is no one-size-fits-all model for every situation.’
‘Often, people will not realize that two organizations that appear similar on the surface may have different cultures and decision-making practices. Integrating a company that provides additional capacity in a familiar industry is different from integrating a company whose purpose is to offer the buyer new expertise.’
‘A typical way to lose value is when talent leaves the acquired business. I often ask clients to imagine that they are laying off all the experts of the company and then need to rehire them. Motivating people by letting them keep their jobs is not enough.’
What does the current situation in the corporate transaction market look like in the current economic environment, as rising interest rates have tightened access to financing?
‘Doing successful deals is more challenging than before, but it’s not just about tighter financing. Many industries have already consolidated to the point where the easy deals have been done, and entering a new area is always more difficult. Competition for acquisition targets and loose financing have driven prices up.’
Ted Rouse was a speaker at the first Aalto M&A Forum in October 2023. The event will continue in the fall of 2024.
Aalto M&A Forum was supported by the Aalto Networking Platform.
Text: Heidi Hammarsten
Photos: Kalle Kataila
Read more about Aalto M&A Forum
Aalto M&A Forum was a top speaking event in Finland in 2023 on the Mergers and Acquisitions theme, with esteemed international speakers who covered current trends and insights as well as recent research on the phases of the M&A process. Our speakers represented both top-tier financial and strategy firms and academia.