Managing a Multi-Vertical M&A Strategy

3M is one of the most famous companies in the world. They have products in various industries such as healthcare, automotive cleaners, personal protective equipment, adhesive tapes, etc. So how are they able to manage their M&A strategy while being involved in so many industries? Helping us discover their secret is Jerry Will, VP of Corporate Development at 3M. 

“Just because something happens you didn't expect, doesn't mean that your thesis was fundamentally flawed, it just means you have to course correct and adapt.” Jerry Will

Multi-Vertical Strategy

In order to manage this multi vertical business, they have a broad conceptual framework that applies to all the different markets. At the top level, they have a consistent view of how to generate value for customers by leveraging their strengths, which are technology, manufacturing, global reach and brand. 

But also, at the same time, they are driving very market-specific insights. They understand the benefits of being very close to customers, so that when they do innovation, it’s usually customer inspired. They know what are the real pain points that they are trying to solve for the customers. 

Industry Prioritization

When it comes to prioritizing what industry to focus on, it all revolves around their commitment to their stakeholders and investors, to deliver growth, return on capital, free cash flow, and margin improvement. 

Decisions are made from regular dialogue between their executive leadership and their business unit leaders, looking at the fundamental strengths, strategic attractiveness, and the financial attractiveness of the market. 

Synergy Realization

Every deal that they do is driven by their business leaders. Also, the synergy plan is developed by the business units and business leaders. You need someone to own that deal and make it work, otherwise you are going to have problems. Luckily for 3M, they have passionate business leaders who take ownership of every deal, and they all have strong alignment about driving results.  

The Red Team

To prevent biases from overly optimistic leaders, they use the red team / green team process. It’s an exercise where the red team is a group of people assigned to convince the business leader not to do the deal. They are given an open platform with no restrictions on the arguments that they can make, and the data that they can access. 

This process works best if there are people who genuinely don't believe in the deal. Find that person and put them on the red team. If it’s necessary, they hire an outside consultant so they can play on the red team with fresh lenses and no biases. 

Integration

At 3M, their integration is a sister group to corporate development. They believe that integration should go hand-in-hand with synergy realization, which is why having a good plan upfront is crucial. As soon as they start a project, integration gets involved right away. All of their acquisitions are fully integrated, which is why it is important for them to figure out how to retain and drive value even after integration. 

“We constantly ask ourselves what does success look like here (integration). If you don't know where you’re headed, you can’t get there” - Jerry Will

They also use scorecards to keep track of progress. They use key metrics like retention, customer engagements, integration on the manufacturing side, tax, customer service, etc. Keeping track of these milestones have been critical in their success. 

Conclusion

3M is highly successful because of their culture. They have business leaders who are very hands-on in every deal that they do, and have collaborative teams that work closely together. The red team exercise is also a very good way to filter out deals and get a high-level view of the pros and cons of a potential deal.

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