Why M&A Plays
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Red Team Exercise

Give your Red Team the right platform to speak up. Allow unrestricted access to data. Let your team use arguments in the best interest of the company.

Play by:

About the play

Deal fever is one of the most leading causes of failures post close. Deal sponsors can be biased, especially when the deal originated from them. Without the proper motivation behind a deal, it can cause a lot of wasted time, money, and effort. 

Oftentimes, the diligence team is not given the right platform to speak up as to why the potential deal may not be in the best interest of the company. This leads to the continuation of the deal without the support and conviction of the deal team. 

Preparation

Use this play to properly assess the deal thesis. Assign people to the red team, with the sole purpose of tearing down the deal thesis and convincing the deal sponsor not to do the deal. This play will give the naysayers a platform to honestly say what they think about the deal without facing judgments and backlash.  

The red team needs to be able to say or go wherever they want. For this play to be effective, they need to have unrestricted access to data and can use whatever arguments they want to use. This will give you the highest visibility of the deal’s potential upsides and downsides. It can also generate additional diligence and pricing theories. 


People

CEO/Deal sponsor, Corporate Development, Diligence Team, Banker, Consultants

Difficulty

Medium

Materials

Team collaboration, Honesty, Creativity

Time

1 hour

Running the Play:

01

Assemble the teams

After the deal thesis has been announced, assemble the red team and green team. It is important to find people who don’t believe in the deal and put them on the red team. If you can’t find any, you can hire an outside consultant to give you an unbiased perspective regarding the deal.

The green team, on the other hand, is there to protect the deal thesis. Ideally, both teams will be composed of 3 to 4 people.

  • Corp Dev person
  • Banker
  • Consultant (inside or outside)

02

Preparation

After the teams have been assembled, give them time to prepare for their respective arguments. 

48 hours before the discussion day, all their cases need to be out in the open for the other team to read. This will give them enough time to prepare for arguments the other team might have for a more productive discussion.


03

Stipulation

You cannot dispute every fact. There needs to be a stipulation on a common set of facts that both teams can agree on.

Each team will only have 20 minutes to present their cases, so it is important to focus on the conversation about the difference in perspective.

04

Discussion Day

After much research and preparation, it is time to face the jury. Set aside 1 hour for this play.

Start with the red team and give them 20 minutes to present their case as to why the deal shouldn’t push through. Then 20 minutes for the green team to convince the CEO otherwise, and the last 20 minutes should be set aside for final discussion. 

At the end of the day, you are all part of one team and you need to agree on what’s best for the company.



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