M&A is already hard enough, but it could be worse if you don’t have the right relationship with your business leaders. They need to understand that every acquisition must have a strategy behind it.
Helping us dive deeper into the importance of working with business leaders and how to make it successful is Michael Frankel, Senior Vice President Managing Director at Deloitte, New Venture Accelerator. And Justin Goldman, Senior Vice President, Strategic Finance and Corporate Development at MediaMath.
“Getting a business leader prepped for that (M&A) in advance is so much better than trying to do it in flight.” - Michael Frankel.
One of the biggest problems working with business leaders is the idea that everyone can do M&A; it's not a specialty, and it's not an area of expertise. It is usually the first problem that you will encounter. And the big challenge is to make them realize that they need expert help because they have day jobs and will not dedicate the required time to effectively finish the deal.
One of the things that you can do is perform a business sponsor lab. Get them, along with other key people involved in the deal, and lock them inside a room for a whole day. Take away their laptops and cellphones, and no one leaves that room unless everyone is on the same page of what the clear action plan is. It is also a good opportunity to shake the business leader and scare them a little bit to focus on the deal. Ask them about things that they don’t know the answer to.
It also is important to get the business leaders to focus on the strategy first, rather than pursuing targets. One of the things you can do to achieve this is to do a “build-partner-buy” analysis. Why would you want to buy this company? Can’t we just partner with them? Or build it in-house? Why or why not? This is a great way to reset everyone's thinking and makes you a better buyer once you answer every question.
Motivation is another big factor for business leaders. You have to keep them motivated and accountable for the deal post-close. Ensure you have very realistic expectations around financial performance and operational goals so that they take the business case seriously. The fastest way for a business leader to lose motivation is to feel like their goals are unachievable.
The worst thing that can happen is when the business leader starts doing crazy things to achieve those numbers and goals that hurt the deal and lose value. Make sure your goals are clear and have a replan process so that when things happen and your initial goals become unrealistic, you have a backup plan to adjust those numbers and keep your business leader motivated.
Working with business leaders can be difficult. It is the Corp Dev’s responsibility to educate the business leaders because they can see what’s coming, know what’s going to happen, and what it will take to make the deal a success. Make sure to keep them on point and that they understand the dedication required to finish a deal.