Winning Tactics for Telco Mergers & Acquisitions

Altman Solon is the largest global TMT consulting firm with expertise in telecommunications consulting. Leaning on our years of expertise in due diligence and post-merger integration (PMI) capabilities, we surveyed 100 M&A decision-makers at top telco and tech firms. We identified best practices and challenges in M&A transactions in the telco sector.   

Across the world, merger and acquisition (M&A) activity is on the rise in the telco and technology sectors. At the same time, conversations with telco and tech firms suggest many organizations still struggle to execute successful M&A.  

Altman Solon surveyed 100 decision-makers in mergers and acquisitions at top telco and tech companies worldwide. Our aim was to better understand best practices in M&A. We complemented our survey by interviewing M&A decision-makers at these firms, providing deeper insights into best practices and common challenges. The overwhelming result: Around 90% of telco respondents wish to improve their deal-making process.  

Leaning on Altman Solon's expertise in M&A strategy and due diligence, survey data, and insights from in-depth conversations, we have identified best practices integral to M&A leadership. Our recommendations span all phases of the merger and acquisition process, from strategic planning to lead generation, due diligence, and post-merger integration.  

Telcos face challenges at each phase of M&A particularly post-merger integration   

Successful M&A transactions require clear goals at the organizational level. They need a proactive sourcing approach, a consistent lead during the due diligence process, and ideally, teamwork with outside consultants for bigger deals. Following the transaction, all stakeholders should align on a post-merger integration (PMI) plan. This plan should be tailored to the goals of the transaction and easy to measure.   

Breaking down this lifecycle into individual steps allowed us to identify the challenges telcos face across all stages of the M&A process. Our findings revealed that the biggest problems arose during the post-merger integration phase. Sixty-seven percent of respondents said they faced challenges there. Sourcing and initial strategizing fell next, with 46% of telco respondents struggling in these areas. 

Successful M&A starts with a documented strategy and dedicated team   

“Having a clearly defined strategy understood across all teams makes it more likely to identify and pursue deals that align closely with the company’s strategic objectives.”
Former VP of Product Management, Tableau  

Successful deals begin with a fully documented strategy that incorporates buy-in from all key lines of business. Yet, 49% of companies surveyed say they lack an M&A strategy that is fully aligned and documented. 

In our M&A work, we often see that a clear strategy is key. This applies to both the company and the deal. This means that all business unit leaders must be aligned with the company’s M&A objectives, with deal-specific strategies such as product and sales integration as clearly laid out as applicable. Having a strategy is just the start: executing with a dedicated M&A team is crucial to deal-making success.

Impact of a Dedicated M&A Team 

Our data shows that companies with dedicated M&A teams were more than twice as likely to report having above-average success in sourcing deals, nearly twice as likely to have fully defined objectives, 24% more likely to report above-average diligence success, and over four times as likely to have best practice M&A processes. 

Outbound target sourcing yields more successful M&As    

A major factor in securing an M&A deal is proactively sourcing targets. This helps telcos control the timeline and avoid competitive environments. 

More advanced M&A teams typically do this more effectively. In fact, 87% of companies that have dedicated M&A teams said they consider their sourcing to be “above average.” That’s compared to just 48% of companies that don’t have a dedicated M&A team. 

This also plays out in which side is the initiator of the conversations. Only 33% of advanced M&A teams cite being contacted by their target company as a top three source of deals.  This compares to 59% of beginner teams, which typically have a narrower range of sources.  

Relying too heavily on inbound deals risks misaligning transactions with a company’s M&A objectives. Companies that are approached by targets also must adjust their timelines and processes to those of the divesting entity or investment bank.  

What's more, earlier bidder involvement through outbound deals means that teams can benefit from a more exclusive process with fewer or no competing acquirers. 

Collaborating with external consultants on due diligence  

“Improper due diligence will adversely affect us post-merger, especially in the case where tech/tools/processes are not clearly defined.” Global Change Lead, Google 

The due diligence phase is critical to any deal, but especially to M&A deals. Our analysis found that teams that engage consultants during this stage of the process are less likely to see this step as a hurdle to getting a deal done. 

Impact of Outside Diligence on Reported Lack of Robustness

Only 6% of the teams who leverage consultants often (between 60% and 100% of the time) experience challenges with due diligence. By contrast, 27% of those who rarely engage consultants (between 0% and 29% of the time) reported that they experienced challenges in this stage. 

And 29% of companies that sporadically engage consultants (between 30% and 59% of the time) experience due diligence challenges. 

This doesn’t just affect the M&A transaction itself but post-deal too. 

Advanced M&A teams use internal leads for due diligence more often. In fact, 84% of them have consistent internal leads. By contrast, only 59% of beginner M&A teams have this advantage. 

Telcos that structure their M&A team to directly report into the C-Suite are also able to execute deals faster and typically face fewer hurdles in strategic alignment. 

Dedicated PMI teams and talent retention crucial in post-merger success 

The results of M&A processes and approaches don’t end when the deal closes. It’s essential that all companies develop a clear post-merger plan that ensures success well after the transaction. 

This area is frequently overlooked, and hence is where most of our respondents said they faced the biggest challenges.  Almost 70% of telco and tech respondents said they struggled with integration following a merger or acquisition. 

A dedicated PMI team – separate from the M&A team – is vital to post-merger success. The team should be onboarded prior to deal close to begin handling integration. Yet, according to our survey, only half (54%) of firms that have completed nine or more acquisitions in the last five years have a separate and dedicated PMI team.  

Another key factor in post-merger success is retaining top talent, as doing so ensures a smooth transition. Unfortunately, beginner M&A teams tend to overlook the importance of talent retention and, as a result, often suffer from low morale and other disruptions post-merger. 

A best practice in this regard is to offer talent retention packages that incentivize key personnel to remain with the company for at least 12 to 18 months after the merger is complete. 

Post-merger KPIs should go beyond financial performance 

“M&A teams are often too financially focused and will miss out on strategic [and complementary] product opportunities that the product teams identify as essential, collaboration with the business units is needed.” -- Former Head of Sales Strategy/Operations, Google 

Tracked Metrics in Post-Merger Integrations

As we’ve known for a while now, the success of a deal can’t be determined solely by financial performance. Still, our survey shows that telcos mainly track financial metrics after an acquisition. They focus on revenue growth (84% of firms), cost savings (76%), and market valuation (47%). 

On the flip side, few of these companies measure outcomes that aren’t related to financial data. Just 41% of telcos measure cross-selling and upselling, and only 12% track employee satisfaction. This is despite the fact that these metrics have proven critical to a smooth transition post-merger. 

For telecommunications companies, a successful deal can often expand network routes, improve positioning, and enrich product portfolios. A failed M&A deal, however, often results in lost revenue, a decline in shareholder value, and a poor brand image. 

Getting the most out of M&A means integrating careful planning at every stage of the transaction. This includes dedicated teams before, during, and after the deal, and knowing when to seek outside expertise.