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HOW DO YOU KNOW IF YOUR M&A HAS BEEN SUCCESSFUL?

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By Karen Thomas-Bland, Global Board Level Advisor and founder of Intelligent Transformation Partners.

 

Who couldn’t have been amazed by the tremendous efforts of Jeff Bezos and Richard Branson recently as they made their journeys into space, opening up new ground in commercial space travel? There are many parallels here to the global mergers and acquisitions (M&A) market which is also reaching record commercial highs. Global M&A activity hit an all-time high in the first six months of 2021, with deals worth more than US$2.6t (EY).  The parallels don’t end there – both have the significant preparation lead time, the dizzy highs of the launch and the sheer hard work which comes afterwards to make it work for everyone.

There are people much better placed than me to talk about why the M&A market is so hot – I will say it’s perhaps a combination of chief executives pursuing big deals they planned during the pandemic, private equity companies sitting on almost $1.6 trillion of uninvested cash (Prequin) and blank-cheque companies having raised record amounts this year. What’s more, the great heights of the M&A market are expected to continue to at least the end of the year.

But M&A deals don’t have the best track record of success – a bit like early space exploration.  Eighty three percent of mergers fail to boost shareholder value (KPMG) and 61% of acquisitions do not earn a sufficient return on the company’s investment (McKinsey).  Deals fail due to several reasons, the key ones being:

  • Inability to drive the expected synergies from the deal (e.g., Yahoo/Tumblror eBay/Skype).
  • Mass exodus of talent from the seller, most of the key talent/senior managers leave (e.g., Credit Suisse/Donaldson, Lufkin & Jenrette)
  • Inability to properly, deeply integrate two businesses that feel initially similar, but have different cultures, processes and ways of working, (e.g., Wendy’s/Arby’s)

So how do you ensure you are in the 17% of deals that boost shareholder value, the ultimate measure of M&A success? From experience of over 50 M&A deals and many post-merger integrations, there are several areas to measure and monitor to ensure your merger or acquisition is a success. I find that establishing an integration scorecard early on covering all aspects of the deal, for example, customer, employees, finance and systems can really help drive focus.

 

Minimise disruption to the customer base and create positive sentiment about the merge

Customers are known to defect in the face of uncertainty and competitors tend to strike when you are distracted. A good approach can be speaking to customers early on about the deal, outlining if and how it will impact them and how the change can help them to deliver greater value in their business. Having in place a clear and targeted customer retention strategy throughout also really helps.

Types of scorecard measures include:

  • What % of your own customers are you retaining?
  • What % of the acquired organisations customers are you retaining?
  • What is the customer sentiment on the merge?

 

Create an organisational culture to attract and retain top talent and key leaders

Like customers, top talent can get lured away by competitors when you are distracted. It’s important to understand the potential reasons that could lead people to leave. Early on I typically settle leadership roles quickly to identify who can then help stabilise the rest of the organisation. Figuring out the two cultures of the organisations and the extent to which to knit them together can help with winning the hearts and minds of both sets of employees.

Types of scorecard measures include:

  • Are you retaining the top talent/key leadership from the acquired organisation?
  • Are you attracting and retaining talent/key leaders to the combined organisation?
  • What is the employee sentiment on the merge?

 

Capture revenue and margin growth opportunities and realise cost synergies

Focusing the integration on the few critical issues that drive the value can really pay dividends. If sources of value and risk are not clearly prioritised early on, it can be a distraction for the organisation. The rigour around revenue synergies needs to be managed at the same level as cost synergies, along with monitoring and challenging investment costs to preserve net value.

Types of scorecard measures include:

  • What growth synergies are you achieving vs. the value case?
  • What cost synergies are you achieving vs. the value case?
  • Are you bringing the integration in on time and budget?

 

Put guardrails in place around changes to processes and systems

It’s important to define the contribution and role of technology and processes that need to change or be refined in the new business operating model. Developing IT integration principles, including prioritising initiatives that accelerate delivery of synergies across functions helps to drive focus. An issue which can occur if not well managed is the inability to balance support for the base business with process and integration efforts.

Types of scorecard measures include:

  • Is the combined IT infrastructure working seamlessly and securely?
  • Are processes clear and understood by all from day one?
  • Are customers and employees having a frictionless experience?

 

Measuring overall success

 It’s important to measure the success of the deal on how it has achieved the desired impact on the business and unlocked the opportunities as set out in the value case rather than activities completed, for example, ‘plans done and delivered’ or ‘systems integrated’. Monitoring the results closely and appointing someone whose specific role is to ‘keep the score’ can help.

I have found that measuring and monitoring these areas really maximises a company’s chances of realising the value case and increasing shareholder value – the ultimate measure of M&A success.

 

Business

THE ACCELERATION TOWARDS A MOBILE FIRST ECONOMY

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By Brad Hyett, CEO at phos

 

Over the last year, we have seen a big shift towards contactless payments. Fuelling this has of course been the coronavirus pandemic, which has made the public hesitant to handle cash due to the health concerns.

As multiple national lockdowns forced physical stores to close, and customers demanded easy, cash-free payment options, merchants had to quickly adapt. The result? An increased provision of pay and collect services.

In the UK alone, 83% of people use contactless payments according to data from the Office of National Statistics.

So it’s vital that merchants are equipped with the most efficient payment solutions, as the UK heads towards a mobile-first economy.

 

Proliferation of contactless payments

In 2020, 90% of UK card payments were contactless. This equates to an increase of 12% on the year prior, despite the total number of payments made falling by 11% from 2019 to 2020. Moreover, the affordability of smartphones has increased significantly over the last decade. And it’s estimated that 84% of UK adults now own one.

We’re Seeing merchants embrace more efficient and cost effective payment methods in response. While physical payment terminals are often too expensive for many small businesses, software point of sale, or SoftPoS, enables merchants to turn hardware that they already own – i.e. their mobile device – into a point of sale terminal.

With merchants increasingly adopting these innovative technologies, contactless payments will continue to gain popularity among the general public. In 2020, 13.7 million people in the UK either didn’t use cash at all or only used it to make a single purchase. That’s double the same figure from the previous year.

 

Changing consumer demand

Now more than ever, consumers are aware of how innovative payment solutions can add efficiency to their daily lives. As such, consumers now demand better payment services, including reduced queuing times, checkoutless stores, and bespoke loyalty schemes.

Businesses such as Mercedes offer an end-to-end digital car purchasing service, so customers can go through the whole car purchasing journey from the comfort of their own home. This includes car deliveries, financing, insurance and more.

Meanwhile, eCommerce giant Amazon has started trialling checkoutless ‘Go’ stores, speeding up the shopping experience by eliminating the queuing process altogether. The days of waiting for a table at a restaurant are also over, as more people have grown used to booking in advance.

Hence, it’s important that we empower small businesses to remain competitive and provide them with the payment solutions to meet customer demand.

 

Global transformations

The digital payments revolution isn’t slowing down anytime soon. By 2026, only 21 percent of transactions will be made using cash.

The US might have been slow out of the gate, but it’s starting to see increased adoption of mobile payments. In-store mobile payments grew by 29% in the States last year alone.

This growth was primarily fuelled by Gen Z-ers and millennials. Latest projections show that there will be 6 million new mobile wallet users by 2025, with millennials accounting for 4 million of this figure. These two generations, the former in particular, have grown up with mobile banking.

For most Gen Z-ers, their first foray into financial services was with a challenger bank like Starling or Monzo. These banks are able to offer online features such as ‘split the bill’, fee-free withdrawals abroad and much more to cater to the modern financial needs of the younger generation.

The Middle East experienced similarly sharp increases in contactless payments. From 2019 to 2020, there was a 200% growth in contactless transactions. This shift towards a mobile-first economy in the region was inevitable; the pandemic merely accelerated this shift. A recent study showed that 80% of people living in the Middle East planned to continue using contactless payments post-pandemic, with speed and security being the main draw.

 

The future is mobile

As parts of the world now start to come out of lockdown, there’s an openness to new solutions and a widespread acceptance of new technologies.

It is now a case of when, rather than if, we’ll see a permanent shift to cashless in the future. For businesses, embracing digital innovation will be key to remaining competitive and keeping pace with consumer demand in this fast-changing payments landscape.

 

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HOW MERCHANTS CAN IMPROVE THE ONLINE PAYMENTS EXPERIENCE

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By Alan Irwin, Senior Director of Product at Global Payments UK

 

The dramatic increase in online shopping over the past 18 months has encouraged many businesses to invest in developing their omnichannel shopping experiences. The reasons vary – some are keen to capitalise on the trend of older shoppers migrating towards ecommerce and some are trying to make up for loss of sales in brick-and-mortar stores during the pandemic. It is also true that many businesses are shifting their models to sell direct to consumers to avoid high marketplace fees and are therefore building their ecommerce channels for the first time.

The checkout experience is arguably the most important and delicate part of the ecommerce transaction, as it can make the difference between a happy customer likely to return, and a shopping cart abandoned out of frustration and confusion. A survey from March 2020 suggested that 88% of online shopping orders were abandoned, i.e. not converted into a purchase. A seamless, customer-centric online payment experience is therefore critically important in ensuring completed transactions. But with so many payment providers available, what should businesses be looking for when trying to keep friction to a minimum?

 

Keep clicks to a minimum

Less touchscreen interaction equals less abandonment. Adapting the payment page to fit any device and supporting popular mobile digital wallets like Google Pay ensures a seamless, stress- and hassle-free checkout experience for the customer and keeps clicks to a minimum. Friction can present itself in the most minor features – for example, when the customer is navigating the payment form, the appropriate keypad should be shown to the customer when required. It’s much easier to enter a card number using the dial pad instead of switching between QWERTY keypad layouts.

Simplifying online forms with autofill and tokenisation also significantly reduces friction at checkout and shortens necessary time taken. Ensuring checkout forms are tagged correctly for “autofill” is a great way to offer customers a single-click to input the payment, shipping, and billing data that they have stored in their browser profile. Similarly offering a guest checkout option will help convert customers who are in a hurry or looking for a one-off purchase. This can also be achieved by offering to store the payment details (called ‘tokenisation’) for express repeat and one-click purchases.

 

Make it easy to understand

A tailored payments approach can increase both domestic and international global sales. By offering a checkout experience in the customer’s language, the option to pay in their currency of choice, and use their preferred method of payment (whether it’s PayPal, Alipay or card), businesses can build loyalty quickly and put customers at ease. It is equally important for merchants to ensure they always display simple direction and information about next steps to instil confidence and prevent customer drop-off. The customer should be informed of what is happening at every stage in the process, for example, whether they will proceed to SCA (Secure Customer Authentication) next or go straight through to completion.

In addition, validating forms in real-time means merchants can highlight potential errors to the customer early on, and payment providers should provide this functionality. This could be an invalid expiry date, an incorrect digit in the card number or incorrect CVV number based on card type. When issues are only flagged at the end of the process, this forces the customer to go back through the steps to figure out the error. Real-time signposting of problems removes this potential friction and reduces the potential for a declined transaction.

 

Ensure seamless security

Merchants should work with a payment partner who offers the right blend of security and compliance management without it coming at a cost to the end-to-end checkout experience for the user. Instilling trust and security in your checkout flow while utilising the right solutions to drive seamless authentication flows will increase customer confidence and help prevent drop-off.

The greatest level of security and control comes from either utilising hosted payment fields that the
merchant can natively integrate into their checkout flow, or a hosted payment page where they can
manage the look and feel. Showcasing your brand on the checkout page with trust signals and logos also adds to building trust with the customer.

Staying ahead of regulations is also important. Secure Customer Authentication (SCA) will soon be mandatory in the UK for all eligible digital transactions, and this doesn’t have to be a friction-full process. Tools like Transaction Risk Analysis (TRA) and Exemption Optimisation Service (EOS) can quickly score transactions and drive exemptions where there is the right blend of transaction risk.

 

The devil is in the details

These three rules for successful ecommerce checkout experiences may seem straightforward, but it is important to apply them at a micro level. It can take only one minor point of friction to cause a customer to abandon their cart, and this will inevitably be replicated across other similar customers. It is critical to identify friction points early on and anticipate customer needs throughout the process. Discussing these points and any opportunities to improve customer checkout experience with your ecommerce team and payment provider is an important first step towards ensuring your entire shopping experience remains competitively seamless and loyalty is won. It may be that your payment provider cannot address them, in which case it could be time to move on in order to stay competitive.

 

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