How to Manage Sourcing Diligence and Integration

Managing an entire acquisition is pretty daunting, especially if you are new to the process. This is why two people lead the charge in any M&A deal; a deal lead and an integration lead. Each has its own roles and responsibilities but are equally important. Let's learn how to manage sourcing, diligence, and integration from two of the industry's top minds: Sabeeh Khan, Director, Corporate Strategy & Development at Syniti, and Aaron Whiting, M&A Integration and Strategic Programs at ContinuumCloud.

Deal Sourcing

When managing your pipeline, be sure to use pipeline management tools other than just Excel. Even though Excel is a good resource to utilize, it's not going to be enough. Collecting and storing intelligence and data on potential acquisitions is key to helping you find more deals.
As for gathering intelligence, aside from industry conferences, Google search can be your best friend. You can pretty much search anything these days, and there are also other websites out there that can give you an overview of what the target company looks like and how they operate.

Diligence

Managing diligence is all about communication. To achieve transparency, Sabeeh uses regularly scheduled meetings with his internal and external team. As soon as they get an LOI signed, diligence kickoff meetings are held to get everybody involved and aligned. He also has weekly check-ins with workstream owners to ensure they are on track achieving their tasks. Creating milestones is important as they will be the trigger point of moving from one stage to the next.

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Alignment with the target company is also another essential part of the diligence process. You need to be planning what integration looks like early on so there would be no big dramatic surprises post-close. Especially the go-to-market strategy.

"If you don't have a go-to-market strategy, you have no business closing the deal" - Sabeeh Khan

A lot of people make the mistake of thinking that the Deal thesis is the go-to-market strategy, says Aaron. The thesis is a great initial conversation driver, but the go-to-market strategy is next-level planning. You need to come up with an actionable GTM strategy before you close the deal. Everything needs to be finalized during the negotiations of the purchase agreement.

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Also, the integration and diligence teams need to have a good relationship and work together post LOI. This is the crucial phase where integration slowly transitions and picks up the work from the diligence team. It is up to the diligence team to set up the integration team for success using communication and transparency.

Integration

Integration is all about implementing everything you planned for in the diligence phase so that knowledge transfer from diligence to integration is crucial. But in any case, do not assume that everybody knows what to do. It could be their first time or they might get separated from the team during diligence. Everyone needs to start on the same page.

‍"Don't make assumptions that people already know the plan; there is power in repetition" - Aaron Whiting

Aaron likes to use a knowledge transfer kickoff meeting to align everyone from the team's objectives. It is important to have a detailed plan on closing the knowledge chasm without reinventing diligence itself. However, if you have the right people involved in the diligence process to begin with, it should be a relatively straightforward process as everyone already knows what to do.

Day One

Day one is one of the most critical parts of the deal. It is vital to have a plan ahead of time, usually before closing. Your messaging needs to be clear and consistent, and that will not happen if you don't have a planned communication strategy.

Also, avoid making significant changes on day one. There are already enough uncertainties going through the employee's head, and you need to reduce or eliminate them. At this point, you should be prioritizing employees and making them feel like they are a part of the new organization. Retention is a huge part of the deal's value.

Conclusion

Managing Sourcing Diligence and Integration in M&A is all about communicating with each other. The diligence and the integration team need to reduce that knowledge chasm between them, and complete transparency is the only way to achieve this. Involve the integration team as early as possible, and have a cadence of meetings to align internal and external teams.

‍This episode is sponsored by S&P Global Market Intelligence. Access the most up-to-date and accurate data on private companies in a single web-based platform so you can get all the resources you need to create a winning pitch.