More and more people now realize that the traditional approach to M&A is inefficient and ineffective. People are starting to find different ways to improve their practice. On the other hand, Google uses the Agile approach to generate more efficient and successful M&A deals. Discussing this approach is James Harris, Principal, Corporate Development Integration at Google.
“The first time I do a perfect deal, I'll consider retirement.” -James Harris
Traditional M&A is usually centered around playbooks. It’s a very structured program where it has clear phases, deliverables, checkpoints, and steps. The problem with that approach is it takes too long to follow the playbook. There are always time factors in an M&A deal. Also, the flow of information doesn’t always come in the order that you expect.
The biggest problem in the traditional approach is getting checklist fever. People get tunnel vision and just focuses on the checklist. That becomes a problem because every deal is different. You need to understand the deal’s goals completely, and often, focusing on checklists gets in the way.
“If everybody is thinking about the checklist, then nobody is thinking about what is not on the checklist.” -James Harris
An Agile approach is more of a goal-oriented mindset. You pick a series of goals that you want to cover, and you can pivot these goals as you discover new things in the deal. Since you won’t use checklists anymore, you ask questions differently. The quality of the deal and the quality of the knowledge are much higher because you are now focused on answering, asking, and focusing on the key questions.
“There are a thousand things to worry about in a deal, but I'm a pretty simple person, so I want to know the top three.” -James Harris
Throwing 300 questions to the target company is not effective because you don’t need the answer to those all at the same time. Some questions need to be answered earlier so that teams don’t get stuck waiting.
You can narrow it down to the top 20 questions that are really important. As soon as you get those 20 over, they spawn 30 more questions. Set time to periodically reassess the prioritizations of the deals depending on new discoveries and the flow of information. Just make sure you don’t lose sight of the strategic objective that came from the deal rationale.
Because the Agile approach is an iterative process, and the flow of information is different, you must have weekly sprints. Talk about the information coming in and how does it affect the other functions. It also gives you an opportunity to reassess the prioritizations of the deals.
As the deal progresses and you're getting closer, pick the tempo up and have three times a week sprints. Depending on the size of the deal, you can also have daily sprints. It’s all about collaboration to discover interdependencies and faster diligence.
Usually, you have an integration hypothesis as soon as the deal starts. You have an idea of how everything will fit together, and you’re trying to make sure that it does fit. As you go forward to your checkpoints, make sure you continue to reassess and update the hypothesis until you get it right. Continue reiterating even at post-close. Have 30, 60, and 90-day check-ins to see if you have missed anything.
Having an Agile approach is extremely beneficial for everyone. It helps you do the deal faster, you are more efficient, and you will get more value out of your acquisitions. Collaboration is key.
Make sure everyone is aligned on what the strategic objective is, create your diligence questions based on what’s important to the strategic objective, and keep iterating as new information comes. Since your not using checklists, having constant sprints will help you identify the risks and the priorities.