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M&A: Is marriage easier than divorce?

2020 was not the year to get married. In Scotland and Northern Ireland registered marriages in 2020 were down by 50% compared to 2019. We all know why!

We will likely see a surge in marriages in 2022 as pent-up dreams are unleashed. The M&A market is demonstrating a similar surge due to ongoing low cost of capital and an excess of cash[1]. Post Covid, the M&A market is thriving.

According to the Financial Market Data Company - Refinitiv - 2021 was the biggest year for global M&A to date with 757 deals worth more than a billion dollars having been announced[2]. In the Third Quarter of 2021 deals with a transaction value in excess of $10 billion were up 50% compared with last year.

"Happily ever after…"

It appears the market is excited, and ready for new acquisitions and partnerships. New businesses are formed, a match made in heaven, ready to overcome the hurdles towards a prosperous future. Like a series of weddings, everyone is lining up the champagne flutes for a series of toasts to new beginnings. Many fathers-of-the-bride will have repeated Aristotle’s quote, “the whole is greater than the sum of its parts”. Acquisitions also provide an opportunity to combine different approaches with new colleagues who can bring fresh ideas and perspectives, resulting in greater diversity of thought and innovative leaps.

As we all know, marriages are not without their challenges and compromises. Acquisitions are no different. Whilst there are many benefits, there can also be challenges that need to be carefully overcome. Google’s purchase of Android for $50 million in 2005 is one example of a merger generating extraordinary market share growth, becoming the biggest OS presence in the smartphone operating systems space[3], albeit with a bumpy journey. How can these good results be replicated? Like a marriage, it is important to ensure that fundamental objectives, goals, and values are aligned, so that both parties are on the same page about their hopes and expectations for the future.

Despite the challenges, the exploration of limitless opportunities and possibilities is incredibly fun. A journey full of hope and optimism to realise potential is more enjoyable than a journey grounded in problems and despair.

"…till divestment us do part"

On the other hand…many would argue that the expected boom in weddings in 2022 will be mirrored by many divorces. This is the tougher side of the story. Divestitures and carve-outs are also on the surge in the M&A market, at their highest in a decade according to Refinitiv. Unlike acquisitions, the challenges of separation in a divestment are huge. It is a sad day when your colleagues move on. Separating a business is fraught with challenges – practical, financial, operational, and emotional.

Over the past decade, the centralisation and streamlining of processes, people, technology, and supply chain has been a common endeavour for growing businesses. This makes a business' operations finely tuned and finely balanced.

Divestments mean ripping these apart which, in itself, is hard enough but particularly for the business left behind following a carve out. Having to re-engineer their business and maximise the benefit of a sale can be a difficult, lengthy, and expensive process with one-time separation costs reaching as much as 13% of the divested business’ revenues[4]. In fact, there is evidence to show that wounds left behind from divestments do not fully heal. A Divestment Performance Monitor created in partnership with Cass Business School and Willis Towers Watson found that 6 out of 10 companies that divested a part of their business in 2019 lost shareholder value[5].

Both parties must work through settlements and agreements (for example how assets are split, custody decisions etc); transitional service agreements (TSAs) exist to outline the provision and cost of services during a transition for many carve outs. These are often uncomfortable contracts that no-one wants to be in. Those involved in managing the relationship between the businesses during a TSA contract period are often faced with commercial and political pressures that can hold back the businesses from getting on with their lives, especially when TSAs are not sufficiently specific[6]. It is predominantly the divested business that needs to deal with the nuances in the TSA. Who will have ownership of IP rights? Who will own the systems? Will staff be segregated in the workplace? These are but a small number of technicalities that need to be figured out.

“I promise I’ll change!”

Go forth, celebrate the new exciting opportunities in domestic and business matrimony coming about over the next 12 months. We know the path ahead is not without complication but with the right help and support the sky is the limit. However, spare a thought for those embarking on the more treacherous separation journey, they need our support more than ever. Marriage is easier than divorce…

Thierno Barry

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Thierno Barry


Thierno is an experienced management consultant with a deep understanding of strategy, architecture and business improvement. He has led multiple cross-functional transformation programmes for medium to large scale organisations.

His expertise extends from the definition of an organisation’s vision to the design and implementation of complex business and IT change. Having worked across an array of sectors and geographies, Thierno has developed a collaborative and fact-based approach to engagements that he will tailor to meet the client’s specific needs.


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