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March 26, 2014

Corporates underestimating cost of M&A integration: EY

As the number of M&A globally increases, corporates around the world often underestimate and under-budget for the integration phase of the deal, according to EY’s survey.

The right combination: Managing integration for deal success survey quizzed over 200 senior corporate executives from around the world and found a fifth stating they have under-budgeted for the integration.

EY said that over a fifth of those surveyed said that, in retrospect, they would have increased the size of their integration budget.
Additionally, of the respondents who had a budget of 10% of deal value, 38% said they would have increased their budget by up to 5% in hindsight.

The survey also found companies on average spent 14% of total deal value on integration. The average deal size for disclosed transactions among surveyed executives in 2013 was €256m ($342m), which suggests that the integration costs per deal averaged at €36m ($50m), according to EY.

EY’s global operational transactions services leader Max Habeck said: "Whether the reasons for a deal were geographic growth, diversification or market share, companies need to strike the right balance between budget, time and team size. If the integration process is done well, it can help businesses grow and succeed. However, if it’s done badly, it can result in significant loss of value."

The survey was conducted by market research company Remark in 2013.

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