Formulating M&A Strategy for Proactive Sourcing

When companies do reactive M&A there is a much lower chance of achieving the intended post-close deal value. In this interview, Mike Kryza, Head of Corporate Development at the Guardian Life Insurance Company of America, discusses formulating an M&A strategy for proactive sourcing.

Formulating M&A Strategy for Proactive Sourcing

10 Oct
Mike Kryza
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Formulating M&A Strategy for Proactive Sourcing

Formulating M&A Strategy for Proactive Sourcing

"The M&A strategy needs to start with the overall business strategy. Without the business strategy, it would be like the tail wagging the dog, as opposed to the other way around." - Mike Kryza

When companies do reactive M&A there is a much lower chance of achieving the intended post-close deal value. In this interview, Mike Kryza, Head of Corporate Development at The Guardian Life Insurance Company of America, discusses formulating an M&A strategy for proactive sourcing.

special guests

Mike Kryza
Head of Corporate Development at The Guardian Life Insurance Company of America

Hosted by

Kison Patel

Episode Transcript

How to start formulating the M&A strategy

The M&A strategy needs to start with the overall business strategy, which is the driver.

In corporate development, we work closely with our businesses to formulate the organic strategy, and then we'll build the inorganic strategy from there. M&A is tough.

So if the business strategy can be satisfied through organic means, that's really the way to do it. But ultimately, businesses want to get into new markets, products, services, geographies, and growth targets all of that put together, makes M&A a viable part of the strategy, and that's where we start. 

We work with businesses. We find the verticals where the M&A activity could help advance the overall strategy. Once we identify those areas, that's where we get busy with deep vertical work. 

As we work with the business strategy, there are gaps and objectives; when you ask how are we going to get from here to there? The answer is, well, we're not without expertise or additional capabilities outside of our organization that help us point the direction.

We work closely with our business leaders and try to provide value by understanding some of the verticals they might be interested in. Providing some external market feedback and knowledge around those verticals and helping them see where there might be a match.

Who's involved in developing the strategy

From a role perspective, business leaders are responsible for hitting their objectives and managing and directing the organization. 

We consider ourselves assistants where it's not organically focused, not just execution of sales strategy, operational strategy, or technology initiatives. Instead, it's identifying the vertical, looking at the participants in that vertical where we might want to acquire that expertise or that service. 

We first deeply research the industry or the vertical we're after before identifying the company. 

  • What are the trends? 
  • What's happening? 
  • Who are the competitors? 
  • Who's winning or losing? 
  • Why are they winning or losing? 
  • What are the critical success factors? 

We look at all the players in a specific industry or vertical. Those are some of the obvious ones. Sometimes with smaller acquisitions, some smaller players aren't perhaps as immediately obvious or as immediately known.

We develop a list and force rank them using those critical success factors as the gating criteria. Those that rise to the top we spend some time with them. 

They're not always all available, or maybe some of the participants are owned by larger entities. So the transaction is not going to happen immediately, but that's what also sometimes allows the opportunity for partnerships. 

We've identified verticals and companies, and sometimes the question is, if we have to own it? Or if we're just looking for that capability? Is there something we might do in partnership with someone? And often, that's the answer, but that's the general way that we identify the parties and then decide which ones we would like to talk about versus not. 

We also really like companies that aren't for sale. There might be a reason that might not be as attractive from a buyer's perspective. So ideally, it is a company that rises to the top, is available, and maybe hasn't thought about as sale but would in talking to the right partner. 


We have relationships with all of the large and even the mid-tier and some of the smaller investment banks. So we try to stay in touch with them and let them know our strategies so that we're on that call list. Because reactive is a good source as well, depending on the situation and the opportunity. 

The industry intel is what sometimes helps us put together that market map just talking to people and understanding who's out there even if we're not talking about a specific transaction. Several of our banker partners are fantastic at providing lay-the-land intelligence and insight. 

Some of the consultants that we have out there, whether they are financial consultants or strategy consultants, it's another network that is trade-focused and trade-oriented. 

Proactive Sourcing

Outbound sourcing is also an opportunity for us to be able to tell our story a little more deeply.

If you're reacting to a process there's a set information request to which you're responding, when you're calling someone on a proactive basis, they usually want to know why are you calling. 

That allows us to say a little about ourselves and why we think this could be really interesting, that we may have a one plus one equals three situations. 

Researching the targets if they're publicly traded companies that's relatively easy. Most companies of any size have websites and are releasing press releases and news.

And then talking with trade partners and people in the industry all allow you, in most cases to build up a reasonable intelligence on different partners and what they're about. 

Sometimes if nothing else, it's just a cold call and say we are interested in companies that we think we might hold in high regard, and you have the conversation that way. 

We have intelligence sources and third-party databases, certainly, whether that is the AM Best and S&P, S&L, or CB Insights.


We use a pretty simple scorecard factor where we're forced to rank via all the different criteria. So we've got qualitative and quantitative criteria that we use. Sometimes they differ depending on the vertical and what we're trying to achieve. 

Some of them, from a qualitative perspective, just a business that we think would accelerate one of our strategic objectives or allow us to accelerate our strategy can be very simple criteria.

Cultural fit for us is a huge and important factor that we look at having a successful management team, having success as an organization, we're less interested in fixer offers.

The M&A process and execution are hard enough without starting with a hand tied behind your back because you've got a business that does need significant improvement and reengineering.

We look at those things in addition to financial metrics and growth. There's certainly math behind it as well. That's where there are both quantitative and qualitative factors. 

It can be different depending on the company's stage or the vertical it's in. Still, certainly, the traditional financial metrics, market share, numbers and growth of clients, and things like that are very important. 

Building the business case

With respect to a specific deal, that becomes very math-oriented, we'll do a quality of earnings report, which is a very deep forensic accounting analysis of the company's existing financials as well as projections going forward. 

So everything around that, we're doing deep diligence on all of the usual suspects, operational technology, human resources, legal. So for any given deal, we have an M&A playbook and a diligence playbook with all those results mapped out.

We usually put the big studies at the end in the appendix, but all of the things for each subject matter area where we're assessing the organization, go into a reasonably robust playbook and, ultimately a presentation and recommendation to our board on how we'd like to proceed. 

We need the business sponsor or owner of The Guardian business to be a strong endorser.

Once we have business support and we have that executive group all nod yes, then depending on the amount, we have a corporate table of authority that has different approval levels up to and including our entire board of directors for something more significant. 

We have an M&A committee of the Guardian executive team, and then we do at certain thresholds, we keep our board apprised of everything. So anything that's material, we certainly go to the board. 

The Initial Outreach

There are several situations where we might say we start with a pilot or some sort of well-defined box of a partnership and see if we can play nicely together. 

And if the opportunity that we think is there is actually there, then go to something more permanent like an acquisition or an equity investment. But for something where there is a smaller or different organization that's playing in our sandbox in which we're already a strong participant, that might be a direct acquisition as opposed to a partnership.

Deal Sources

We work directly with partners so that when we're getting involved. So it's more not just for a commercial agreement, but maybe there is some customization or a minority equity investment that allows the company to grow and for us to do something more meaningful together.

So it's more when there's a material meaningful above and beyond the type of commercial agreement, that's maybe threshold or gated by equity investment or by a more meaningful, long-term situation.

We have that partner or channel function and so many people within our organization are just interested in the M&A function. We call them lunch and learns, or perhaps talking at different staff meetings in our organization. 

I leave those meetings saying to the people they know better than me, I love to get ideas from our internal organization. Because ultimately, they're living and breathing that every day. That market intelligence is really valuable. We've got a little over 9,000 employees at Guardian and I consider every one of them a potential source for a good idea. 

We have specific meetings with each of our businesses where the product, distribution, and partnership people are together.

Part of marketing is certainly our message, our value proposition versus competitors. And so, talking and working with them about how we're positioning Guardian as well as how Guardian is positioned relative to its competitors is very helpful. 

It helps us learn more about the competitors. It also helps us tell our story better than we might otherwise. So we consider them to be good partners. 

How to attract better deals

Appreciate what it is you're doing because it's really important

Don't look at any activity as a narrowing activity. Like a junior banker, even if they're sitting behind a spreadsheet, there's a lot to be learned sitting behind spreadsheets and a lot of insight that you can get out of it. Information flow is critically important. And at the junior level, you're exposed to a lot of information. 

Don't be shy

If you're a junior person, maybe you're not in a position as a third-party banker to be calling clients, but you can certainly be talking to the more senior members of your team. Within Guardian, we try to be more collaborative and encourage people to speak up at all levels.

Have an appreciation and mindfulness for the information you're getting exposed to. And then speaking up in whatever venue is appropriate, whether that is to more senior members of your team of ideas you have. Asking a lot of questions, or if it is a venue or a situation that allows you to reach right out to folks to hear the ideas certainly doing that. 

No corporate development or M&A professional will ever get upset by someone coming and saying, Hey, here's an idea I have. What do you think of this? So I really appreciate those conversations. 

It's so important and it's so hard now in the age where email and texting and everything else. But, I still continue to think that the person-to-person communication is where, whether it is a job search or M&A idea, or get career advice, you can't beat the person-to-person communication. It's just the most important of all of it. 

Stay Curious

We get so many inbounds, and even if people are generating good ideas, the last thing I want to do is to schedule another meeting. But putting that aside and being naturally curious is the way to do it.

Natural curiosity is really important. And sometimes if you're in the middle of a really busy deal or just in the middle of normal day to day, you want to turn that curiosity off. I think that's the wrong thing to do. 

Proactive outreach to the executives

There are a couple different things. One would be whether the contact is made by someone, me, or someone on my team, or whether you actually use an investment banker to make that contact, that's also another strategy. 

Depending on the target, I like to do that outreach because I think that we tell our own story better than a third party. But sometimes, if a call comes from a banker, that has incremental credibility because the person getting the call says, oh, they're serious because they've hired a banker to make this call. 

You can find anybody nowadays just through online resources and materials or friend of a friend or even working with bankers, analysts or consultants who can connect you with somebody and are happy to do that. 

I've never really had a challenge or a problem finding the right person and establishing the right kind of contact methodology that I want.

If they're unresponsive initially, try to find a shared connection, that'll bring incremental credibility is something that we'll do. There's a certain point that if you've tried all the things I just said, they know why you're calling and maybe it just means they're not interested.

So there's a point in time, which enough's enough. But I like to make sure as many times as possible to be able to tell the story and have that connection with the person. 

Calling is probably the hardest because if you're calling someone to ask, if they're interested in some strategic transaction. But they somehow know what that means underneath the surface, given the situation or depending on the situation.

But we try to only connect with companies we hold in high, very high regard. And we'd like to think that we're a company that's viewed that way from the outside. So that makes it easier to make those initial connections. 

I would say almost always, we get through and know where the company stands. So we don't normally have a situation where we're doing outreach and we just walk away with a question mark. 

"There is no no in M&A. You can't come back and say, you couldn't get the meeting or couldn't get in the door." - Kison Patel

Everyone now get so many emails all the time. If it's from someone that you don't know at all, think about yourself if you don't recognize it at all, you almost hit and delete before you even read it. 

So you have to put something in there that's intriguing or mysterious or makes them want to respond. Yet I tend not to put a whole lot of detail in the email because, normally these are confidential and sensitive conversations.

So it's probably similar to email to what the opening phone call, few sentences would be around holding a company in very high regard and wanting to explore ways we might do business together if there are mutual opportunities. 

Pursuing a Deal

It's normally a couple hour meeting where we talk about our respective businesses. You usually walk out of that meeting and you and your team look at each other and say, this is something that could really work. There's just chemistry, and there's a tone. 

It's almost like one-on-one human relations that you know whether you're like somebody or not. And there are specific reasons for it. It's more of a chemistry tone obviousness of the opportunities in those initial meetings.

It's normally given an agenda. We say, Hey, we're going to talk about, these 3, or 4 things, our company background, our primary markets, our primary businesses, and we'd like you to do the same. And if it's at a high level, you can do that.

And as they just get to know you, if it's more serious than an initial meeting, obviously, they exchange non-disclosure agreements and do it that way. But it's typically like a bread and butter list of fundamental topics you want to understand about the business.

I'm kidded internally for having a very low hit ratio because we tend to be really discerning on a cultural basis, a financial basis, synergy basis, a satisfying strategy basis. And so, I would say it's probably from a hit rate perspective, the way I would put it is, is you gotta kiss a lot of frogs before you find your your princess, I suppose. 

Nurturing leads

We have a list internally. It's nothing too fancy or technologically savvy, but there's a limited number of list. We probably talk to between 15 and a hundred companies a year. It's just a matter of having a list and a cadence on how you do that.

It's not a boilerplate process; they're more curated individual names that could go down a lot of different paths, as opposed to you going to crank a hundred things and you're going to have two or three kick out. It's not like that. 

You have to stay in touch. And again, another thing that makes that think M&A so interesting is you never know where the next opportunity will come from or come out of. So keeping in touch and ensuring that you're doing outreach systematically is to your point really important. 

I do it if each contact is for some sort of a value-added reason. You see something in their press releases that they just signed another big client, 'Hey, congratulations. Good for you; glad that things are continuing to go really well.'  Or an article you see that might be of interest to them, just having some healthy interaction.


The people focus is so important because it's the people that ultimately come together and execute well or don't come together or don't execute well. So for us, cultural fit is the most important thing. Number one is having the management team with the same core values you have.

We have strongly emphasized the importance of people, going above and beyond for our clients, doing the right thing and conducting ourselves ethically. 

And as you get to know people, expressing that or showing through their strategies or what they've done with their organizations, that can become clear pretty quickly.

It can be a little frustrating if the core values are not a match. It's got to be action-oriented. that's how we feel. We conduct ourselves at Guardian, is when there are natural disasters in some of our communities, there are Guardian representatives historically who pass out food or generators or things like that. 

Having a sense of community goes above and beyond for customers same type of thing, having specific metrics around customer service and not just numbers and not just effectuating a sale.

Leadership and culture

Even startups typically have senior management teams that have been around a while and done different things. So whether it's somebody's track record or history, outside of working for the specific company. Or whether it's the way, particularly with early-stage companies.

  • How they've raised money? 
  • Who they're taking their money from? 
  • How they're deploying that money? 
  • The types of hiring that they're doing?
  • How they've made their projections versus the deliverables for those projections?

We like it when people are passionate about their business, which comes out just in how they're talking about it. We want people who have successful track records.

We also like people who realize where their organizations have a need, where being associated with a firm like ours could help them. So self-awareness around critical needs and how they're going to be met. 

Deal Fever

Deal fever is one of the larger challenges for an M&A person because everybody assumes you're the deal person, so you want to get the deal done no matter what.

Getting a deal done just for the sake of getting it done, if it's a bad deal, will end up biting you down the road. So I try to focus on good productive deals that meet specific metrics and fulfill specific strategies.

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