Deals conducted at the height of the financial crisis were 15 percent more likely to create value than those conducted in the pre-recessionary boom-years -- despite the perception that the financial crisis was a challenging time for deal making, says a new study from KPMG International.

The study, titledA New Dawn: Good Deals in Challenging Times, shows that the proportion of value-creating deals worldwide rose from 27 percent in 2005-2006 to 31 percent on acquisitions completed during the financial crisis, betweenJanuary 2007andJuly 2009. In addition, value remained neutral in 37 percent of the acquisitions studied, while 32 percent reduced value. This is an improvement compared with deals in the strong economic years of 2005-2006, when 34 percent remained neutral and 39 percent decreased in value.

In terms of regional comparisons, the KPMG study revealed thatAsia Pacificacquisitions had the largest volume of value-creating deals at 40 percent, followed by the Americas at 31 percent, andEuropeat only 17 percent. However,Asia Pacifichad an equal number (40 percent) of deals with lower value, followed by the Americas (39 percent) andEurope(30 percent).

"It is promising to see a larger volume of acquisitions generating enhanced value, but the real question is whether this trend will continue when economic pressures subside," saidDan Tiemann, KPMG's Global Transaction Services Leader and head of the U.S. Transactions & Restructuring group. "We believe the uncertain economic climate played a contributory role in spawning this improvement. In the more difficult environment, acquirers knew their deals would be under close scrutiny from shareholders and the market, and they made sure that their deals were well executed, for the right reasons, and at the right price."

KPMG's study also concluded that a reduced ability to 'flip' investments at higher multiples encouraged corporate and PE owners to implement the type of meaningful operational changes that can help materially increase the probability of transaction success.

Steve Miller, National Lead of KPMG's U.S. Integration Services team said, "We are seeing a greater level of professionalism in the deal process, with executive teams and boards building stronger and more experienced internal deal teams, and also knowing when they need to bring in outside assistance.

"Successful acquirers recognize the importance of assigning their best and brightest to integration programs, and then helping to ensure they have access to leading practice methodologies, tools, and prior integration experience," he said.

The Acquirers' Perspective

As part of the study, KPMG also surveyed companies who had completed deals in the same 2007-2009 period and found that the primary M&A driver was growth. Almost half of all respondents (48 percent) cited increased market share as one of their primary deal drivers, with 35 percent pointing to geographic growth strategies, and 27 percent citing expansion into new growth sectors.

When asked what they would do differently in their next deal, most survey respondents cited better due diligence (19 percent), followed by faster implementation/integration (17 percent), and more attention to human resources (HR)/cultural matters, and better planning, both at 11 percent.

"Some companies start integration planning before deal agreements are even signed to ensure expected synergies from the deal can be realistically achieved," said Miller.

"Embedding speed into the process is critical," he added. "Organizations tend to re-set themselves fairly quickly after an initial post-close honeymoon period. The level of change that is often required to extract transaction value becomes increasingly difficult to implement with every week that 'planning' does not turn into 'doing.'"

However, despite the importance placed by most acquirers on achieving synergies, 44 percent of all survey respondents said they spent little or no time investigating the potential synergies of the deal, and only 22 percent of respondents said they spent a great deal of time on synergy analysis.

"It's also important not only to identify the synergies underpinning the deal, but to track and set milestones for achieving those synergies," saidRob Vanderwerf, National Lead of KPMG's Strategic Services practice. "A synergy, which may initially start as a higher level estimate during early diligence when access to operating data is more limited, only becomes 'real' when validated from the bottom up as part of more detailed, later-phase operational planning."

When asked what type of due diligence they performed, most respondents said financial (81 percent). Surprisingly, less than half of those surveyed performed strategic (45 percent), IT (42 percent) or HR (38 percent) due diligence.