How to Formulate Your M&A Strategy

Too many times, we've seen M&A used as a strategy to grow businesses. But in fact, M&A is not a strategy, it's a tool that organizations should use to achieve their corporate strategy. And once you understand your true north, having an M&A strategy is just as important. In this article, we will learn how to formulate an M&A strategy with Matt Arsenault, VP of Corporate Development at Jamf. 

"M&A strategy is about finding the best fit for the corporate strategy and enabling and accelerating its timeline." - Matt Arsenault

Importance of M&A Strategy

An M&A strategy should not be mistaken for a corporate strategy. It’s a subset strategy that is a means to the overall direction that a company wants to take. One of its primary functions is to identify whether to buy, build, partner, or license to achieve the desired growth. 

If you don't have an M&A strategy, you won't know the required sequence of how to achieve growth. But the most important thing to remember, and where most people get it wrong, is to always keep customers or end-user at the forefront of decisions. 

However, because customers' needs are constantly changing, the M&A strategy has to be dynamic, and it has to evolve and continuously be evaluated at least once a year. 

Socialize your M&A Strategy

One of the best things to do is communicate with other people to understand how they think and move. Keep communications open and talk to the product management teams, customer success teams, sales teams, or even partnership teams. Learn to welcome ideas!

Socializing your strategy is one of the best ways to source deals. Seeking other people's perspectives will help you understand the customer's thinking and what they need, and it helps you reach companies that won't otherwise pop up on your radar. The best companies to acquire are innovative startups because of less competition. The more people that know about your M&A strategy, the better your chances of finding those startups. 

How to formulate

When it comes to formulating an M&A strategy, the main goal is to understand your market and the customer's problem. That's the only way you will be able to generate great value out of a transaction. 

1. Simplify your goal - What is it that you want to do? What kinds of bridges are you trying to build?
2. Understand the target market - How competitive is the market? Are your customers overlapped in that market? How far away is that from your core? Perform a SWOT analysis if necessary. 
3. Plan to get there organically - Use your customer's voice to navigate how to step into a new space and determine your ability to solve different problems.
4. Sequencing Opportunities - With all the potential target markets, you need to narrow it down and identify where to primarily focus. Which one will deliver success?

Scorecard

It is important to have a scorecard process before target evaluation. Set how you look at companies based on an inward assessment of your ability to enter a market organically, dictated by customers.

"Every company should have a scorecard for internal, and all corp dev teams should start from that scorecard." - Matt Arsenault

When building out a scorecard, consider how your teams are being managed and the overall process of your company. The scorecard should contain information about items the management team consistently tracks. 

For instance, if your organization is consistently tracking sales metrics and you're looking at a target that doesn't have or use sales metrics, you will have a problem.

After you have determined your score, look at the differences between you and the target in order to gauge the integration challenges. The M&A scorecard needs to consider the culture and change management aspects of the entire deal.