Chapter 4: The Agile M&A Process Model

Play #3 - Priority Backlog

Managing the incredibly complex system of emerging responsibilities while making sure all team members are focused on the highest priority tasks as deal goals fluctuate, is one of the greatest daily challenges M&A practitioners face. Concentrating important collaborative efforts on constantly changing priorities is luckily an undertaking well addressed by Agile through a backlog technique.

Maintenance of a quality backlog is critical to team-wide collaboration. The prioritized backlog is all about how the team approaches the work itself, whereas plays like the kickoff meeting and the daily standup primarily serve to create and maintain the team dynamic fundamental to the Agile Process Model. Using a unified backlog presents an improvement over Excel, in terms of enhanced visibility and facilitating collaboration more effectively in real time. Sending Excel spreadsheets back and forth between team members is time-consuming and opens up vulnerability to errors, but utilizing a backlog management tool expedites and streamlines the information exchange process.

The prioritized backlog emerged from the “Kanban” board, which itself originated from a Japanese manufacturing process.

Kanban. Toyota developed Kanban — meaning “signpost” in Japanese — to address workflow issues. In Kanban, a project team places a whiteboard in a highly visible area where team members congregate. The whiteboard is then divided into four areas: a “backlog” or “to do” area, a “priority” or “next up” area, an “in progress” area, and a “completed” area. A process to be completed is broken up into many smaller items or subprocesses. These subprocesses are written out on slips of paper and placed in the “to do” area of the board. The team then works collaboratively to move cards forward through the subsequent areas of the board. The Kanban board gives members an intuitive visual indicator of the current state of the project, and helps to identify which areas need attention.

Many Agile methodologies organize their workflow according to the principles of Kanban. The organizational specifics vary, and most teams now rely on PM software in place of a physical board, but the goal remains the same: to provide employees with a collaborative and immediate visually intuitive overview of the progress of the project.

Expert Opinions:
“Kanban (backlog) is really useful when you're dealing with a client situation where there's a lot going on during integration. So you're pulling people who are also doing new product development, there's a new strategy over there, there's a new market entry over there. So you need to be very flexible and not set up unachievable goals because you need to understand that everyone you're working with is being pulled left, right, and center. So Kanban can be particularly useful in that kind of environment.”
David Boyd, Founding Partner of Agile Gorilla

To create a backlog, a project team collaborates to break the larger project up into small, actionable work items. Collectively, these individual tasks form the project backlog. The team should organize the backlog in order of importance. In some cases, cross-functional tasks, and tasks with many dependencies take precedence over low-level or monofunctional tasks. In other instances, certain monofunctional tasks are serial and need to be accomplished first, for reasons pertaining to timing. Think about a fully integrated project timeline: some items must be addressed first in order for others to be successfully completed. Typically, all team members work on different tasks in parallel.

The preliminary breakdown and prioritization of a project follow the kickoff. The deal lead or project manager assigns initial tasks to different team members during the kickoff meeting. As the project evolves, team members report on their progress with various work items during standups. Teams may opt to maintain a physical copy of the priority backlog in their meeting area to track progress, but the primary backlog should be organized on a collaborative PM platform. As the project progresses, the project team should periodically reprioritize the backlog to reflect emerging project conditions and challenges, keeping the highest priority items near the top of the list whenever possible. Continual reassessment of the sequence will help the team remain focused on the acquisition strategy, eliminate unnecessary or repetitive work, and avoid losing sight of the big picture.

Expert Opinions:
“I have seen people get checklist fever, which basically means they are not stepping back and thinking about [the big picture]. Pilots have rigorous pre-flight checklists, but the pilot also walks around the aircraft and does a general assessment outside of the checklist to make sure that they are ready to fly. I think the same thing should happen with normal processes. A good quote comes to mind, ‘if everybody is thinking the same way, then someone is not thinking,’ and I think that is a good way to look at a checklist. If everybody is thinking about the checklist, then someone is not thinking about what is not on the checklist.”
James Harris, Principle of Corporate Development Integration at Google

The Prioritized Backlog for Diligence

Managing details and ensuring that everyone is working on the highest priority tasks throughout the deal process is one of the largest challenges in M&A.

Priorities are in flux throughout the deal as new situations arise and conditions shift. In order to keep track during the process, tasks are tagged as a high priority on diligence or integration trackers, then shared with the team and counterparties so that everyone involved knows what to focus on. As the number of items tagged as high priority grows, however, half the list could be considered a “top priority.” The list becomes meaningless, and the team’s valuable time and efforts become disorganized.

Maintaining lists of tasks in descending order of priority, visible to your team and appropriate stakeholders, develops a focus on top tasks that keeps the deal moving forward through evolving variables and distractions. In any project, regardless of scale, keeping a list of highest priorities and tracking progress is critical to a successful outcome. Although this seems intuitive and painfully obvious, the traditional approach to M&A deals often excludes a centralized list that updates in real-time for all practitioners to view and track. A project management platform makes it easy to change the order of priorities as deals evolve and new information emerges.

This type of prioritized list is often referred to as a backlog. With a centralized backlog organized in this way, teams can react quickly to new requests or changing priorities; the backlog allows for clarity and agility in collaboration on big-picture goals.

As the deal team processes documents, they inevitably discover accounting errors and information gaps, which require additional requests issued to the target company. The Agile M&A process acknowledges that the parameters of complex projects like due diligence invariably fluctuate. Prioritization of new requests/work items on a regular basis ensures that the team addresses the highest priority items in a timely manner. While the specific process for handling prioritization varies depending on the size and complexity of each deal, the following are a few solutions to consider.

Option 1 - Daily Prioritization

For large deals managing a high volume of requests, daily prioritization may be necessary to ensure the data within the backlog reflects the current priorities.

Option 2 - Weekly Prioritization

For deals with a more moderate volume of diligence requests, teams may find prioritizing the backlog on a weekly basis more effective. A weekly approach provides a simple structure to ensure that requests are reviewed and sequenced accordingly, but at the same time allows for expedited processes to occur if an urgent request enters the workflow.

Option 3 - On-Demand Prioritization

Special requests or urgent, unexpected needs discovered during an M&A project must be managed in an organized fashion. The newly-revealed needs should be prioritized against known work items, in order to evaluate priority.

Key Takeaways:

Value Proposition: building and maintaining a prioritized backlog ensures that the team is focused on the most important work and on identifying critical issues as early as possible

How to put it in play:

  1. Review the backlog regularly
  2. Add/update the backlog to reflect latest priorities
  3. Pull work from the top of the backlog, as a general rule

Anti-patterns to avoid:

  1. Adding work without sufficient understanding of the larger goals
  2. Prioritize work only when an emergency situation is identified