Aligning Strategy with Your M&A Process
Simply put, strategy drives transactions; however, those less experienced in the realm of M&A might fall into the trap of confusing M&A for strategy. Expert practitioners caution that M&A by itself is not a strategy, rather M&A is a powerful tool that can help a company achieve its objectives (sometimes at an accelerated pace).
When first considering an M&A transaction, it is critical to identify a clear strategy and objective. Pairing strategy with the process, specifically by getting all members of the deal team (including people such as lawyers and third party bankers) a clear message of the goals of the business, helps focus, streamline, and simplify overall effort throughout the lifecycle of the deal.
What is corporate development’s role in aligning strategy?
- A foundation of a strong Corporate Development team begins the process of aligning strategy with the process. More specifically, Corp Dev must be tied to the decision-makers on the executive level. Now, this does not mean the head of Corp Dev has to be a C-level executive, but they do have to have a seat at the executive table because they need to hear all the conversations regarding goals, growth trajectory, and the like. This leads to more buy-in by all the leaders and work functions, which tends to translate to more successful deals. Looking further down the line, this also greatly aids with integration.
- Additionally, when information regarding strategy and goals is not siloed, but rather openly shared and continuously circled back to as the deal progresses and deal teams become larger, everyone will continue to understand why the deal is taking place. All processes and procedures are built around this goal. Many problems (as if there were not enough already during a deal) arise when the strategy is not clearly articulated.
- Another best practice related to aligning strategy and process is to establish a deal champion, someone who will stay with the deal from beginning to end and be responsible for its success, keeping a keen eye on the overall strategy. This practice accelerates accountability and ownership.
How does corporate development best source deals to achieve its strategy?
- Early on, a strategic filtering process should be established. The intention behind this action is to eliminate additional noise and emotion during an already overwhelming time. The strategic filtering is based on your specific company and business units; it might include things such as targeting new markets, adding additional technical capabilities, increasing distribution and accelerating product roadmaps.
- Once a strategic filtering process is in place, you move on to the financial criteria.
- Market scanning is the next part of the process. A thorough market scan allows you to make a list and prioritize and rank companies. This list is critically important, therefore, it should be a robust list.
- Corporate Development should be the owner and manager (the list is a living document) of the above list. Corp Dev experts emphasize this point because you will also want to keep notes on the targets you have so the list includes as much information as possible.
- Next, showing the list, often in the short form to others in your company, will allow for additional input and refining. For instance, the Sales Department might make a comment such as “we keep losing out on opportunities to this company because they have X functionality.” This piece of information, uncovered by essentially networking in your own company, allows you to continue to refine the list.
- Finally, it is worth mentioning that over time as your Corporate Development team becomes known, deals will start to find you.
How does strategy impact the success of deal execution & integration?
- Execution and integration come along much later (6, 12, sometimes more, months) in the process. Consequently, the strategy ensures the deal’s objectives cannot get lost. Again, as the deal goes on longer and the deal team expands a really solid communication plan, linking back to the strategic mission is key.
- Strategy, especially when Corporate Development teams stay involved (and do not simply “hand-off” deals), helps during integration when many problems tend to come up. A best practice to keep strategy guiding integration is to have a weekly integration steering call with Corporate Development and all team leaders. In this way, communication and focus remain strong as all leaders will hear high-level points, and the process and rationale behind each point.
- Integration milestones should also be tailored to your specific acquisition and strategy. As milestones are reached, there is time to reflect and see if the process towards the overarching goal is taking place; if not, these milestones serve as an appropriate time to pivot and refocus on strategy.
While there is not a clear-cut definition for a successful transaction (just take a look at all the numbers online that speak to deal with success and failure), aligning strategy with M&A process can help both the buyer and seller meet their goals. Moreover, aligning strategy with process keeps teams focusing on what is important throughout the deal, therefore eliminating some of the many distractions that can result in lost value, poor integration, and/or one of the many other M&A deal pitfalls.