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Prepare to lead on strategy. As CDOs get more involved in both corporate and M&A
kljYl]_q$l`]qoaddf]]\lg`Yn]Ykljgf__jYkhg^fglgfdql`]kh][a[kg^l`]\]YdeYjc]l
but also disruptive forces in play across all sectors.
Take a (big) technology leap. With advanced analytics, CDOs have a unique opportunity to
explore and understand better the various factors that can affect a transaction.
10
Measure and reward performance appropriately. The successful CDO will be able to put
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;<>!akj]khgfkaZd]^gj$hjgna\af_gZb][lan]af[]flan]kYf\j]oYj\k&
12
6%
20%
11%
30%
7%
Ra
is
Perform only
19%
Lead only
in
ing
st
ing
iz
rv
Not involved
5%
The
Capital
Agenda
es
54%
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lead only when investing capital. Most lead on deal
origination (91%), valuation (95%), due diligence
1,!Yf\f]_glaYlagf 1*!&
Inv
e
g
in
Pr
57%
24%
Op
ti m
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./!$lYphdYffaf_ .-!Yf\afn]klgjj]dYlagfk ,+!&
22%
Lead and perform
25%
10%
22%
43%
Introduction
Steve Krouskos
Deputy Global Vice Chair,
Transaction Advisory Services
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k]]caf_lg_jgol`jgm_`e]j_]jkYf\Y[imakalagfk E9!&K]araf_ghhgjlmfala]ko`ad]j]eYafaf_^g[mk]\gfghlaearaf_[YhalYd
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\m]lgjYha\eYjc]l[`Yf_]k$l`]Zdmjjaf_g^k][lgjdaf]kYf\\akjmhlan]^gj[]kkm[`Yk]f`Yf[]\_]ghgdala[Yd[gf[]jfkYf\
shareholder activism.
CDOs are playing an increasingly vital role in strategy at both the corporate and business-unit levels. That change is leading
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aehgjlYf[]g^l`]jgd]$alYdkgZjaf_kZjgY\]jj]khgfkaZadala]kYf\Yf]]\lg\]n]dghf]okcaddk&
Gn]jl`]hYkln]q]Yjk$l`];<>`Yk\]n]dgh]\egj]^gjeYdar]\hjg[]kk]klg]nYdmYl]\]Ydk&Alak[gf\m[laf_j]_mdYjhgjl^gdag
j]na]okg^l`]Zmkaf]kkYf\mf\]jklYf\kl`]_jgoaf_f]]\lgh]j^gje[mdlmjYdlYkk]kke]flkYk_dgZYdarYlagfZjgY\]fkl`]
pipeline of potential targets.
With a wider remit, the CDF now also needs a stronger grasp of such megatrends as digital transformation and big data
analytics, as well as understanding of the latest regulatory and tax implications of deals.
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already been seized by early adopters. It could be the next evolutionary leap for corporate development, given the functions
increasing convergence with strategy. Our latest study certainly suggests this as a possibility, while highlighting emerging
trends and providing insights on best practices being adopted today.
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\]eYf\k^gjl`];<G&F]o[`Ydd]f_]kj]imaj]f]oj]khgfk]k&Gmjklm\qf\k[gjhgjYl]\]n]dghe]flYlYljYfk^gjeYlagfYd
af][lagfhgafl&L`]egklkm[[]kk^md;<Gkafl`]^mlmj]Yj]dac]dqlgZ]l`gk]j]^g[mkaf_$j]k`Yhaf_Yf\h]j`Yhk]n]f
reinventing themselves today for the needs of tomorrow.
Steve Krouskos
1.
Strategic alignment
The CDF, led by the CDO, is now at the heart of the organizations growth strategy. Our
survey clearly shows that developing a leading role in corporate strategy and strategic
planning have become critical priorities for corporate development. Among our survey
j]khgf\]flk$,,j]hgjll`Yll`]Za__]kl[`Yf_]afl`]jgd]g^l`];<Ggn]jl`]hYkln]
years is the greater alignment with the wider corporate strategic focus.
L`];<Gjgd]mk]\lgZ]egj]ghhgjlmfakla[affYlmj]$o`]j]Ykfgoal`Yk[`Yf_]\
lgZ]af_egj]YhYjlg^l`]kljYl]_a[_gYdkg^l`]Zmkaf]kk$fgl]kgf]]p][mlan]$o`g
j]khgf\]\lggmjkmjn]q&L`]jgd]`YkZ][ge]egj]g^Y\jan]jafl`]E9hjg[]kk$fgl
bmklY[ggj\afYlaf_jgd]$ZmlYdkglYcaf_Yka_fa[YflhYjlafl`]hjg[]kk&
Not surprisingly, alignment with strategy is a success factor that executives cite repeatedly.
With more than half of our respondents focused on growth, it is critical for CDFs to deliver
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executives and departments in their organization as the most important factor in enabling
them to do so.
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planning on top of the existing business development, M&A, portfolio
eYfY_]e]flYf\ghlaearYlagf^mf[lagfk$kYqka transaction
executive at an emerging market conglomerate.
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44%
18%
Strategic focus
16%
Volume of activity
Deal process
10%
6%
6%
Size of deals
Reporting lines
Other
LYZd]*2@gokYlak]\Yj]qgmoal`l`]k]Ykh][lkg^qgmjljYfkY[lagfk[gf\m[l]\afl`]dYkllogq]Yjk7
5%
20%
30%
12%
20%
46%
=^[a]f[qg^\m]\ada_]f[]hjg[]kk
5% 3%
1%
20%
NYdmYlagf2Y[imakalagfk
17%
N]jqkYlak]\
Kge]o`YlkYlak]\
35%
29%
22%
27%
49%
ImYdalqg^\]Ydk[gfka\]j]\
3%
22%
21%
26%
44%
9[`a]naf_kljYl]_a[gZb][lan]k
5%
22%
25%
45%
12%
8%
5%
F]mljYd
40%
38%
43%
Kge]o`YlmfkYlak]\
FglkYlak]\YlYdd
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LjYfkY[lagfafl]_jYlagf
L`]egklkYlak]\j]khgf\]flk
For each respondent, EY summed the scores for each
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O]mk]\l`akk[gj]lgk]hYjYl]l`]lghl`aj\g^j]khgf\]flk
l`ak_jgmho][Yddl`]j]khgf\]flko`gYj]egklkYlak]\
with transactions.
LYZd]+2O`YlYj]l`]c]qkm[[]kk^Y[lgjkaf]p][mlaf_gfY_jgol`kljYl]_q7
23%
Executive
performance
metrics
31%
Evaluation of
c]qe]lja[k
47%
Integrated
implementation
team
59%
62%
67%
;d]Yjdq\]f]\
strategy
performance
metrics and goals
Existence of
[d]Yjdq\]f]\
strategy
Alignment of strategy
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departments
Convergence of M&A,
corporate strategy and
sharing of resources
9dl`gm_`l`];<GYf\[`a]^kljYl]_qg^[]j ;KG!jgd]kj]eYaf
separate in most organizations, the connection and collaboration
between the two are becoming much stronger. The roles overlap in
various aspects of the transaction life cycle, particularly portfolio
eYfY_]e]fl$f]oeYjc]l]phYfkagf$\]faf__jgol`hjagjala]k
Yf\gZlYafaf_[geh]lalan]afl]dda_]f[] k]]lYZd]-!&9fmeZ]jg^
companies that responded to our survey are already more proactive
in terms of pipeline management and deal origination, dedicating
more internal resources and time than they did in the past to
a\]fla^ql`]ja_`llYj_]lk&>gj]pYehd]$l`]qYj]eYcaf_Z]ll]j
connections with their business units and leveraging advanced
technical methodologies. They now evaluate potential acquisitions
much earlier, long before the actual transaction.
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\]n]dghe]fl^mf[lagf$l`]qYj]YZd]lg\jYogfYka_fa[Yfl
number of resources, with large strategy teams giving the ability to
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kYqk$Oal`Y\]n]dghe]fllgoYj\Yegj]Y[lan]kljYl]_q
department, the CDO is now able to have a more active and
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Corporate
strategy
27%
17%
CSOs,
others
5%
25%
70%
1% 12% 9%
Transaction
strategy
78%
CDOs
CSOs,
others
1% 7%
2% 7%
Transaction
opportunity
32%
60%
18%
73%
CDOs
CSOs,
others
5%
38%
58%
3% 17%
Transaction
execution
80%
CDOs
CSOs,
others
4% 4%
Transaction
negotiation/
close
48%
CDOs
33%
60%
2% 5% 12%
82%
CDOs
CSOs,
others
4% 5%
26%
17%
10%
66%
23%
50%
CDOs
Transaction
effectiveness CSOs,
others
Not involved
77%
55%
23%
Perform only
63%
Lead only
74%
57%
Analysis of strategic
alternatives and portfolio
optimization
68%
74%
Innovation/expansion into
new geographic markets
52%
58%
51%
58%
51%
51%
Competitive intelligence
46%
<]faf_kljYl]_a[hjagjala]k$
including organic growth
70%
CDOs
CSOs, others
Note: respondents who indicated that they held leadership position on corporate
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6% 9%
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each other, so there is more often healthy
competition to generate bright ideas rather than
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a transaction executive at a European consumer
products company.
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[jakak
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2004-2008
2009-2012
2013-2014
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gZb][lan]k
Acquisitions dominate
thinking
Divestments on agenda
Greater creativity in
doing deals
Increased awareness of
fYf[af_Yf\ZYdYf[]k`]]l
constraints
Jgd]af\]faf__jgol`
kljYl]_q
Global regulatory
convergence and tightening
regulation
Rethinking geographic
footprint as portfolios are
reassessed
Greater awareness of
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;gee]j[aYdYf\gh]jYlagfYd
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klY_]
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[gjj]dYl]\lg\]Ydkar]
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hah]daf]eYfY_]e]fl
Mk]g^Za_\YlY'YfYdqla[k
lggdk
M&A
CDO
Transaction
strategy
Capital allocation
Aligning M&A
strategy with
corporate strategy
;?G7
;HG7
Portfolio
management
Acquisitive
growth
Growth strategy
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gZb][lan]$Yf\l`];<Ggofkl`Yl$kYqka
transaction executive at a US manufacturing
company.
2.
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g^[geh]lalan]hgkalagfaf_$o`gkoaffaf_$o`gkdgkaf_$kYqk a
transaction executive at a US company in the
water industry.
Strategic planning
88%
Finance
83%
Accounting
65%
Legal
52%
Business unit/operations
46%
Corporate governance
42%
Regulatory
40%
Risk management
36%
Tax
29%
Treasury
25%
Big data/analytics
21%
Investor relations
21%
19%
Information technology
11%
Human resources
10%
4%
Real estate
Note: multiple responses allowed
54%
52%
68%
%
66
73%
72%
71%
quite or most
important
60
5
%
54% 8%
regular or
extensive use
83%
Operational assessment,
cultural competencies
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`meYfj]kgmj[]k!akYfgl`]jYj]Yafo`a[`[gjhgjYl]\]n]dghe]fl
is becoming more deeply involved. Our respondents indicate having
used external advisors or other business units to obtain services
such as operational diligence, modeling or business planning and
commercial diligence. This indicates the need to develop greater
mf\]jklYf\af_YZgmlo`]flgd]n]jY_]kcaddk^jgegl`]jZmkaf]kk
units or to co-opt operational specialists into the CDF.
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hdYqaf_]d\`YkZjgm_`lhgl]flaYdlYj_]lk^jgeYddgn]jl`]ogjd\
aflgl`]\]YdkhY[]$j]kmdlaf_afakkm]kg^[mdlmjYdlYf\j]imajaf_
E9kljYl]_aklklgd]Yjf\a^^]j]flklqd]kg^\]YdeYcaf_Yf\
klYc]`gd\]jeYfY_]e]fl&
Gmjj]kmdlkk`goYka_fa[Yflaf[j]Yk]afl`]fmeZ]jg^
j]khgf\]flkl`YlhdYflg]fl]jf]o_]g_jYh`a[eYjc]lkafl`]
f]pl)*egfl`k.(mh^jge,+afl`]dYkl)*egfl`k
and this will present its share of challenges. Furthermore, deal
kljm[lmj]kafeYfqeYjc]lkYj]`a_`dq[gehd]p$g^l]fafngdnaf_
bgafln]flmj]k$hYjlf]jk`ahk$YddaYf[]kYf\YjjYf_]e]flkgl`]jl`Yf
straightforward mergers and acquisitions.
Table 11: Top 3 areas where the CDF has used services from
other business units (BUs) on transactions over the last
12 months
Operational
diligence
++
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business
planning
+(
Commercial
diligence
*/
60%
43%
56%
60%
Strengthening the
core business
Acquiring new technology
43%
48%
53%
45%
Achieving economies
of scale
L`][gehd]palqg^l`]ljYfkY[lagfhjg[]kk
`Ykaf[j]Yk]\oal`l`]af[dmkagfg^[mdlmjYdl
assessments and increased focus on seller and
c]qklYc]`gd\]jkafl`]lYj_]lZmkaf]kk$kYqka
transaction executive at a European consumer
products company.
45%
34%
42%
43%
Portfolio optimization
Speed to market
29%
Next 12 months
53%
38%
Last 12 months
58%
Growing involvement in
portfolio management
9fgl`]jeYbgjkljYl]_a[[`Ydd]f_]l`Yl;<Gkoadd^Y[]afl`]^mlmj]
oaddZ]l`]lYkcg^j]ZYdYf[af_Y[imakalagfkoal`\an]kle]flkafY
role and culture that has typically focused more on acquisitions.
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transactions, and are preparing to spend more time on acquisitions
that will fundamentally change their business. They expect the
average percentage of their time spent on such transformational
Y[imakalagfklgaf[j]Yk]afl`]f]pllogq]Yjk$lg*-&)^jge).&/
[mjj]fldqYf\bmkl)*&-n]q]YjkY_g&
However, our survey respondents say that in two years they expect
to spend even less time on divestments than they do now. But it is
advisable to not lose focus on divestments, because they create
value, are a strategic route to longer-term growth and should be
considered as part of regular reviews of the entire portfolio.
AfYZmkaf]kk]fnajgfe]fleYjc]\ZqjYha\l][`fgdg_a[Yd
advances, regulatory changes, increased shareholder scrutiny
and shifts in customer purchasing power and demand, strategic
portfolio reviews are the most important tool to optimize capital
Yf\j]kgmj[]Yddg[YlagfkYf\\]l]jeaf]o`Yl\][akagfklgeYc]
regarding growth, restructuring or potential divestment.
The CDOs role is central to these decisions, and our study reveals
that respondents are increasingly more involved in leading on
capital allocation decisions than they were in 2010.
Small to mid-size
acquisition
Acquisition of a
minority interest
35
46.5
19.5
18
5.7
12.5
16.7
Transformational
acquisition
25.1
Sell side:
14.6
12.9
9.9
Small to mid-size
divestment
IPO/spin-off
Transformational
divestment
3.9
4.8
3.9
3.3
3.8
3.2
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development. Strategy is focused on portfolio
eYfY_]e]fl'Y\bY[]f[a]k&L`];<G`]dhk
determine capital allocation, and the business
mfalkogjcoal`afl`gk]hYjYe]l]jkZmkaf]kk
mfalkgofl`]kljYl]_q$kYqka transaction
executive in the manufacturing industry.
Spotlight
Big data analytics can
be a big deal for M&A
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egj]dac]dql`Yfgl`]jklgmk]YfYdqla[kj]_mdYjdqgj]pl]fkan]dq
oal`j]_Yj\lgl`]imYdalqg^l`]\]Ydk[gfka\]j]\ /+nk&-+!Yf\
l`]]^[a]f[qg^l`]\m]\ada_]f[]hjg[]kk /-nk&,*!&;<Gkoadd
`Yn]lg\]l]jeaf]`golgeYc]l`]Z]klmk]g^l`]k]f]okcaddkYk
the technology and use of analytics matures.
:a_\YlYak[geegfdq\]f]\afl]jekg^^gmjNkngdme]$
variety, velocity and veracity. Data has exploded at an astonishing
jYl]afZgl`ngdme]Yf\n]dg[alq l`]kh]]\Ylo`a[`al[ge]k$Yk
o]ddYk`go^Yklalf]]\klgZ]YfYdqr]\!afl`]dYkl^]oq]Yjk&Alak
present in a huge variety of structured and unstructured forms, and
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9fYdqla[kakl`]e]Yfk^gj]pljY[laf_nYdm]^jgel`ak\YlY the
tool through which actionable insights are generated. In a study
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l`]Za_\YlYl][`fgdg_qYf\k]jna[]keYjc]logmd\_jgoYlY*/
[gehgmf\YffmYd_jgol`jYl]$j]Y[`af_MK+*&,ZaddagfZq*()/
gjYZgmlkaplae]kl`]_jgol`jYl]g^l`]gn]jYddaf^gjeYlagfYf\
[geemfa[Ylagfl][`fgdg_qeYjc]l&
Big data has huge potential to transform the effectiveness
of CDOs and the teams they lead. So far, companies have
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l`]nYdmYlagfklY_]$0+g^gmjj]khgf\]flkeYc]eg\]jYl]lg
extensive use of analytics, but by and large, they have not yet
d]n]jY_]\l`]^mddhgl]flaYdg^Za_\YlYYf\'gjYfYdqla[kafE9&
Ways in which big data analytics can boost deal effectiveness
include:
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and opportunities in a deal
Drawing quantitative and qualitative insights from social media
analytics during due diligence on a target and its products
Mf\]jklYf\af_c]qZmkaf]kk[q[d]kZq]ehdgqaf_YfYdqla[k
]&_&$ogjcaf_[YhalYd!
=ehdgqaf_Y\][akagf%eYcaf_^jYe]ogjcZYk]\gf\YlYk[a]f[]
lgj]Y[`YfgZb][lan]na]og^YkljYl]_a[hgjl^gdag
Aehjgnaf_l`]]^[a]f[qg^l`]\an]klalmj]hjg[]kkYf\hj]hYjaf_
[Yjn]%gmlfYf[aYdaf^gjeYlagf
Identifying potential synergies by utilizing larger data sets and
\]l]jeafaf_o`]l`]jl`]]ph][l]\kqf]j_a]kYj]dac]dqlgZ]
realized
:a_\YlYYfYdqla[k[Yf`Yn]Yka_fa[YflaehY[l
on business improvement and transactions. The
following are some examples of how analytics can help
companies in a transactional context:
Social media analytics
While performing due diligence
on behalf of a company in the
Ymlgeglan]Y^l]jeYjc]l$=Qmk]\
kg[aYde]\aYYfYdqla[k KE9!lgYfYdqr]YdYj_]\YlYk]lg^YZgml
500,000 online posts to gain deeper insights into a target and reach
YfgZb][lan]na]ogfl`]lYj_]lhjg\m[lk&L`]lYj_]l[gehYfqYkk]jl]\
that its superior warranty policy and product quality had been the
driver of revenue growth historically. But SMA highlighted that relative
hja[af_oYkYem[`egj]ka_fa[Yfl\jan]j$oal`l`]\ada_]f[]hjgna\af_
a cost-reduction opportunity on warranty policy.
During an engagement in the food and beverage industry, EY used
KE9lgYfYdqr]Y\YlYk]lg^YhhjgpaeYl]dq,(($(((gfdaf]Yf\
social media discussions to gain deeper insights on a target. SMA
`a_`da_`l]\l`Yll`]lYj_]lkhjg\m[llYkl]oYkka_fa[Yfldqaf^]jagj
to the competition and a deterrent to future growth. The diligence
implication was that the target had been underspending on product
\]n]dghe]flYf\j]^gjemdYlagf[gklk$hjgna\af_Yka_fa[Yfl
post-close revenue enhancement opportunity.
Cash management
A telecom company had a large customer base but
fragmented visibility into its accounts receivable
9J!&=Qhjgna\]\\]lYad]\ljYfkY[lagfYd\YlY
analysis that allowed the company to institute a
cash culture program to ingrain AR metrics into
the company culture, compress payment terms,
accelerate initial customer contact for collections
and consolidate the number of collection paths. The company
]klYZdak`]\Ykljm[lmj]\YhhjgY[`lgeala_Yl]jakcYf\kYoYfglYZd]
[Yk`%goaehjgn]e]fl&
Using sophisticated analytics, a global pharmaceutical company was
YZd]lgdaZ]jYl][Yk`^jgeogjcaf_[YhalYdlghYq\gof\]Zll`Ylal
had incurred during an acquisition. There were clear opportunities for
improvement in order-to-cash, purchase-to-pay and inventory, and
analytics helped the company optimize these opportunities.
John Hopes
Partner, Transaction Advisory
Services, EMEIA
#,,*(/1-)/01)
b`gh]k8mc&]q&[ge
Stuart Bright
Partner, Transaction Advisory
K]jna[]k$9kaY%HY[a[
#.)*0*1-.,0+
klmYjl&Zja_`l8Ym&]q&[ge
10
Spotlight
Regional variations
Americas
18%
47%
60%
74%
41%
have a separate
M&A committee
lead and perform on
corporate strategy
Yj]kYlak]\oal`l`]]^[a]f[q
of the due diligence process
use analytics for the valuation
of divestitures
say the CDO is accountable for
transaction integration
Lgh+ljYfkY[lagfgZb][lan]k
1. Strengthen the core business
2. =fl]jf]o_]g_jYh`a[eYjc]lk
+&Acquire customer base
Lgh+oYqk;<Gl]YekYj]e]Ykmj]\
1. Fit of deals with corporate strategy
2. ;gjhgjYl]h]j^gjeYf[]'klg[chja[]
+&Number of deals completed
Lgh+j]Ykgfk^gjljYfkY[lagf^Yadmj]
1. Integration process
2. Commercial assessment process
+&Strategic process
45%
57%
81%
67%
40%
have a separate
M&A committee
lead and perform on
corporate strategy
Yj]kYlak]\oal`l`]]^[a]f[q
of the due diligence process
use analytics for the valuation
of divestitures
say the CDO is accountable for
transaction integration
9kaY%HY[a[
20%
64%
80%
53%
89%
have a separate
M&A committee
lead and perform on
corporate strategy
Yj]kYlak]\oal`l`]]^[a]f[q
of the due diligence process
use analytics for the valuation of
divestitures
say the CDO is accountable for
transaction integration
Lgh+ljYfkY[lagfgZb][lan]k
1. =fl]jf]o_]g_jYh`a[eYjc]lk
2. Acquire new technology
+&Strengthen core business
Lgh+oYqk;<Gl]YekYj]e]Ykmj]\
1. Deal pipeline and opportunity analysis
2. Fit of deals with corporate strategy
+&ROI on completed transactions
Lgh+j]Ykgfk^gjljYfkY[lagf^Yadmj]
1. Strategic process
2. Commercial assessment process
+&Integration process
Lgh+ljYfkY[lagfgZb][lan]k
1. Achieve economies of scale
2. Acquire new technology
+&=fl]jf]o_]g_jYh`a[eYjc]lk
Lgh+oYqk;<Gl]YekYj]e]Ykmj]\
1. ;gjhgjYl]h]j^gjeYf[]'klg[chja[]
2. Realization of transaction synergies
+&ROI on completed transactions
Lgh+j]Ykgfk^gjljYfkY[lagf^Yadmj]
1. Corporate development process
2. Commercial assessment process
+&Deal management process
11
+&
O]ljqlg^gddgoYklYf\Yj\]p][mlagfhjg[]kk$Ykjakcakfgl
[gjj]dYl]\lg\]YdnYdm]$]phdYafka transaction executive in the
transportation industry.
L`]egj]kljm[lmj]\hjg[]kk^gjdafcaf_mhl`]ljYfkY[lagfhjg[]kk
oal`kljYl]_qakeYafdqj]hj]k]fl]\Zql`]E9[gmf[ad$]phdYafka
transaction executive at a European automotive company.
12
Valuation
95%
Finance
88%
Due diligence
95%
Legal
86%
Board/stakeholder approvals
90%
Strategic planning
84%
Kqf]j_qa\]fla[Ylagf'YfYdqkak
88%
Accounting
82%
86%
Business unit/operations
82%
Transaction integration
86%
Tax
78%
Post-closing adjustments
86%
Treasury
75%
Transaction measurement
81%
Corporate governance
71%
Tax mitigation
78%
Regulatory
68%
Opportunity analysis
75%
Investor relations
63%
Continuous improvement/feedback
69%
Risk management
60%
Investor relations
68%
53%
67%
Human resources
52%
67%
Information technology
46%
Benchmarking
65%
Real estate
33%
Big data/analytics
52%
% often or always
LYZd]).2<g]kqgmjZgYj\`Yn]Yk]hYjYl]E9[geeall]]7
CDO
CFO
Yes
29%
>j]im]f[q7
Quarterly
Monthly
Each stage of M&A process (NDA,
fgf%Zaf\af_g^^]j$<<$fYdg^^]j!
Kljm[lmj]7
No
71%
<]YdYhhjgnYdl`j]k`gd\7
Everything
Up to US$5m
Up to US$100m
13
Evolving performance
measures for an evolving role
H]j^gjeYf[]e]Ykmj]e]flak[`Ydd]f_af_alakYfakkm]l`YlY
number of our respondents consider problematic. In our survey,
1-g^j]khgf\]flkj]hgjll`Yl[gjhgjYl]h]j^gjeYf[]akaehgjlYfl
or very important in determining individual compensation, and
0-kYql`YlY[`a]naf_kljYl]_a[gZb][lan]kakYfaehgjlYflgjn]jq
important measure affecting individual compensation. Although
alak\a^[mdllgYhhdqimYflalYlan]e]lja[klg]n]jqYkh][lg^l`]
function, reliable measures are a component in determining the
effectiveness of both the CDO and the CDF.
J]khgf\]flko`gYj]egklkYlak]\oal`[geh]fkYlagf$Z]f]lk
Yf\af[]flan]kYj]egj]dac]dqlg`Yn][geh]fkYlagfdafc]\lg
\]hYjle]flYdh]j^gjeYf[]&:mll`][`Ydd]f_]da]kaf\]faf_
precisely what individual performance means: the measures our
respondents use run the gamut from cost, time and quality to the
km[[]kkg^hYklY[imakalagfklg$afgf][Yk]$o`Ylgl`]jh]ghd]af
l`]gj_YfarYlagfkYq&
L]Yee]Ykmj]e]fl`Ykegj]kh][a[\]falagfk2l]YekYj]
measured most commonly on deal pipeline and opportunity analysis
,/!Yf\lg^\]Ydkoal`[gjhgjYl]kljYl]_q ,.!&J]khgf\]flk
o`gYj]egklkYlak]\oal`[geh]fkYlagf$Z]f]lkYf\af[]flan]k
Yj]egj]dac]dqlg`Yn]l`]ajl]Yeh]j^gjeYf[]e]Ykmj]\Zql`]
actual price received or paid versus the original plan.
14
95%
Individual performance
82%
Department performance
76%
Discretionary
66%
% somewhat or very important
85%
Discretionary
65%
60%
59%
Effective integration
58%
Acquiring revenue
57%
47%
Table 20: What are the top three ways teams (departments)
Yj][mjj]fldqe]Ykmj]\7
Deal pipeline and opportunity analysis
47%
46%
39%
37%
34%
32%
25%
Fgl]2mhlg+j]khgfk]kYddgo]\
LYZd]*)2Hjgd]g^Y\]kajYZd]hY[cY_]ZYk]\gfe]Ykmj]k
[gjj]dYl]\lgkYlak^Y[lagfoal`[geh]fkYlagf$Z]f]lkYf\
incentives
Key department measures
ROI of completed transactions
Effective integration
Acquiring revenue
Continued deal performance
Discretionary
Number of deals completed
Number of deals considered
Financial
hjglYZadalq
0-
Value of synergies
delivered versus
plan
/*
Synergy delivery
against timetable
/)
LYZd]*+2O`gakY[[gmflYZd]^gjljYfkY[lagfafl]_jYlagf7
74%
Integration
manager
64%
48%
CEO
Business
unit leader
CDO
33%
16%
CFO
15
Looking ahead
9j]qgmhj]hYj]\7
Gmjkmjn]qk`gokl`Yll`]egklkYlak]\[gjhgjYl]
development leaders today are forward-thinking and do things
differently from their peers. They are more likely than their
counterparts to take the lead on new market investments,
establish formal deal and portfolio review processes. They
will have a variety of risk management skills (including legal
Yf\lYp!YkhYjlg^l`]aj;<>kkcaddk]lYf\j][]an]o`Yll`]q
consider a desirable compensation package.
But this is not enough. What is adequate or even leading-edge
lg\YqoaddfglZ]km^[a]fllgkm[[]]\afl`]E9eYjc]lg^
tomorrow. Leading CDOs and CDFs will likely take a different
16
*& Klj]f_l`]fl`];<>kaf%`gmk]kcaddk]l&
As the CDF becomes more involved in decisions about portfolio
optimization and pipeline management, a whole array of new
af%`gmk]kcaddkoaddZ][ge]f][]kkYjq$hYjla[mdYjdqd]_Yd$lYp
Yf\j]_mdYlgjqkcaddk]lk&>gjeYfq[gehYfa]k$l`]k]eYqfgl
traditionally have been part of the CDFs repertoire, but they will
become essential.
L`][gjhgjYl]\]n]dghe]fl^mf[lagfg^l`]
future will be inspired by fund management;
evaluation of investment performance
and investment opportunities will be very
aehgjlYfl&
O]kmjn]q]\egj]l`Yf+((;<Gk$;KGkYf\gl`]j;%d]n]d
]p][mlan]kZ]lo]]fBmf]Yf\Fgn]eZ]j*(),&L`]eYbgjalqg^
j]khgf\]flkkh]f\Yld]Ykl.)g^l`]ajlae]gfljYfkY[lagfk&
J]khgf\]flk[Ye]^jge[gehYfa]kaf+1[gmflja]k3-,g^l`]
companies surveyed reported revenues of more than US$5 billion.
Nearly two dozen industry sectors were represented, and the top
n]af\mklja]ko]j][gfkme]jhjg\m[lk$af\mkljaYdhjg\m[lk$gadYf\
gas, technology, and power and utilities.
Our data collection methodology included online and telephone
surveys, face-to-face interviews, group sessions similar to focus
groups, and independent research.
Regional split
14%
9kaY%HY[a[
39%
EMEA
47%
Americas
+
*
* * ) )
)+
),
,
,
)+
-
-,
.
++
)(
.
0
1
)(
Industry split
Revenue split
Other
<US$1 billion
Industrial products
Health care
MK)MK-Zaddagf
Telecommunications
>US$5 billion
Technology
Media
Life sciences
Financials
Asset management
Chemicals
Contacts
Global
Pip McCrostie
Steve Krouskos
Regional leaders
Americas
Richard M. Jeanneret
9kaY%HY[a[
John Hope
Americas Leader
Transaction Advisory Services
ja[`Yj\&b]Yff]j]l8]q&[ge
#)*)*//+*1**
9kaY%HY[a[D]Y\]j
Transaction Advisory Services
bg`f&`gh]8`c&]q&[ge
#0-**0,.111/
Japan
Kenneth G. Smith
EMEIA Leader
Transaction Advisory Services
Yf\j]Y&_m]jrgfa8al&]q&[ge
#+1(*0(..1/(/
Japan Leader
Transaction Advisory Services
c]ff]l`&keal`8bh&]q&[ge
#0)+,-0*.,((
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust and
[gf^a\]f[]afl`][YhalYdeYjc]lkYf\af][gfgea]kl`]ogjd\gn]j&O]
develop outstanding leaders who team to deliver on our promises to all
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ogjcaf_ogjd\^gjgmjh]ghd]$^gjgmj[da]flkYf\^gjgmj[geemfala]k&
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.
9Zgml=QkLjYfkY[lagf9\nakgjqK]jna[]k
How you manage your capital agenda today will define your competitive
hgkalagflgegjjgo&O]ogjcoal`[da]flklg[j]Yl]kg[aYdYf\][gfgea[
nYdm]Zq`]dhaf_l`]eeYc]Z]ll]j$egj]%af^gje]\\][akagfkYZgml
kljYl]_a[YddqeYfY_af_[YhalYdYf\ljYfkY[lagfkaf^Ykl%[`Yf_af_eYjc]lk&
Whether youre preserving, optimizing, raising or investing capital,
=QkLjYfkY[lagf9\nakgjqK]jna[]k[geZaf]Yk]lg^kcaddk$afka_`lYf\
experience to deliver focused advice. We can help you drive competitive
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