Starting Up Your Corp Dev Function

Executing acquisitions without a dedicated function is highly inefficient and would often result in failed deals. Why? Because when a company purely relies on inbound opportunities, they would not get the best deals possible. To be good at M&A, a company needs experience and consistency. This blog will discuss starting up your corporate development function featuring Veena Ramaswamy, Head of Corporate Development at Lemonade.

"Getting a deal done is not always the best thing for the business." - Veena Ramaswamy

When to start building the function

According to Veena, there are three ways M&A could grow a company.

1. Accelerating - Helps achieve the current or future business goals or objectives, growth in existing products, adding adjacent products, and speed to market.

2. Strengthening - Can add capabilities that enhance the value of the current or future product offerings. It can be anything from tech licenses, talent, or people. 

3. Protecting - M&A can also safeguard against competitive threats or market movements.

As soon as leaders realize they want to leverage acquisitions as a valuable tool for their growth, they must start formalizing and creating a corporate development function. 

The most significant benefit of standing up a function is that it allows a company to be more proactive about opportunities rather than reactive, resulting in better deals.

Another benefit is that transactions will be executed better. No one understands the business more than the internal people, who are motivated to grow the company rather than get a deal done. 

Process of building the function

1. Get to know the business well - Engage with the executive team, business leaders, and functional leaders to understand:

1. The vision
2. The product
3. Target customer
4. Go-to-market strategy
5. How do they see themselves achieving their growth targets

There are no dumb questions. Be curious enough to ask as many questions as possible to understand how the company works. 

2. Establish the process - This is critical for folks without M&A experience. Put in a single-page document the actual steps to get a deal done. Keep it high-level, as there are no hard rules regarding the exact process because every deal differs.

1. Valuation
2. Letter of intent
3. Diligence
4. Alignment on pricing and negotiating
5. Various checkpoints with the board
6. Formal offer

It's also vital to educate people on corporate development and its role in the company's growth. Share that through a town hall or lunch, so everyone knows the function, the process, and the criteria. 

When it comes to maturing the function and its people, nothing beats experience. Just continue doing deals, and people will learn over time. 

3. Become an information hub - Gather as much information as possible regarding relevant industry. It can be through newsletters, reports, conferences, or one-on-one conversations with various stakeholders. Also, share information pertinent to the team.   

4. Alignment with stakeholders - Everyone must understand that not every opportunity is a deal. Conversely, when a deal pushes through, everyone has to own it. The worst thing that could happen is for executives to start pointing fingers when the deal is not doing very well. 

Get alignment early and do it in a group setting. Let people hear others' doubts and concerns, so everyone can respond or react to them. 

Biggest Lessons Learned

Through years of experience, Veena has three important lessons learned that she would like to impart to everyone:

1. Nothing ever goes to plan - Corporate development must be nimble and flexible. Understand the criteria and where to push or not push. 
2. Deals are never done until it's closed - Signing and announcement is only step 1. Deals can always get delayed or take different paths that no one could anticipate. 
3. Maintain perspectives about time - The success of a deal does not make or break a business. It's just a tool and a part of the growth strategy.