Welcome to the first issue of The Mercator Monitor! At The Mercator Group, we are focused on providing emerging and middle market companies with strategic advisory services around interim management and M&A services. The Monitor is designed to provide timely and useful information on M&A trends, statistics and deals, and new developments important to our clients, partners, associates and friends. We value your input in how we can improve the Monitor. Let us know your thoughts and suggestions.

The documents are signed and the champagne is flowing. You’ve completed you first major acquisition. Now what?

Researchers say that as many as 80 percent of acquisitions fail as customers, management and momentum evaporate, along with planned cost savings and earnings growth.

While some of these failures are based on bad financial engineering or strategic decisions, usually the inability to integrate overlapping product lines, sales forces, and management into one cohesive organization creates the problems.

As hurricane season approaches, it is a great time to be introspective about the state of the merger and acquisition environment nationwide and in New England. While selected activities are signs for optimism in some sectors, the unsettled and stormy economic forces that we are experiencing suggest a cautious approach.

Nationwide, overall M&A activity YTD on a dollar value is down almost 40% from 2001. In comparison, the same statistic for middle market deal flow is down 22%, suggesting that the larger deals are falling out of favor.

Due diligence is the systematic, in-depth process carried out by a party to validate claims made by a company targeted for an investment, loan, merger or acquisition. The classic due diligence covers areas such as finance (P&L, Balance Sheets, capital structure), sales and marketing (top customers, strategies and tactics, revenue models), human resources (organization structure, management, incentives, turnover), legal (lawsuits, intellectual property, insurance) and other business plan related items. Noticeably absent from the typical list is technical due diligence. This is all the more disturbing as many of the firms that are targets for merger or acquisition are technology-based companies – firms where technology is either the product or plays a key role in delivering their products or services.