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March 27, 2023

Executing M&A without Corporate Development

Corporate development teams are responsible for finding attractive targets. However, companies can execute successful mergers and acquisitions without corporate development. In this article, we explore insights provided by Michael Farlekas, the CEO at E2open, who has executed 14 deals without a dedicated corporate development team.

“Acquiring companies has a lot more to do with selling than with buying. It's about selling the concept of the combined company.” – Michael Farlekas

M&A without corporate development

Michael firmly believes that his team understands their business more than anyone, and is one of the reasons why they don't have a corporate development function. His team knows why they want to do M&A, their executives are really experienced in their industry, and they don’t need anyone telling them what to buy. Michael works with three different executives to execute an acquisition:

  1. Head of strategy 
  2. Head of go-to-market all revenue
  3. Human capital people

Sourcing Deals

When sourcing deals, Michael emphasizes that approaching target companies is similar to a sales process. The key is to sell the vision of the combined company’s value and be persistent. Michael advises building relationships with a variety of companies in the industry to increase the chances of success. The more prospects there are, the higher the probability of a deal happening. 

Michael's success in acquiring companies forced his team to restructure their business model to avoid slowing down their selling motion. They broke their business into several units and had multiple people in charge of customer subsets. 

Approaching Due Diligence 

Aside from the third-party lawyers and accountants, Michael relies on each of their functional areas to manage due diligence. Since at E2open they are buying companies with no growth rate and are in the same industry, their integration plan is simple: remove duplicate costs without affecting the customer experience.

The only thing they focus on at E2open is the consistency of the target’s revenue which will tell them how loyal the customers are to the business. Since they want to integrate quickly, they know they will break things. Michael’s team wants to ensure that they have an opportunity to correct their mistakes before clients could leave them.

Keys to Success 

For first-time acquirers, Michael offers two pieces of advice. Firstly, keep the vision of the business in mind and use M&A as a means to achieve that vision. Secondly, prioritize employees during the integration process. Acquiring companies can be a stressful time for employees, so transparency is essential to avoid instilling fear, uncertainty, and doubt in the acquired business.

Be transparent about the changes that are coming. Telling them sooner, even if it's bad news, is a thousand times better than telling them abruptly on day one.

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