Managing the Entire M&A Process from Start to Finish Part 1

Engineering skills in M&A

Engineering is very methodical and structured. And once you build a career in a specific industry, you will develop certain abilities. 

• Zooming in and out when the situation requires - You see the big picture and are also detail-oriented when the need arises. 
• Solving complex problems and translate that into a simple framework - You can filter out unnecessary information to make better decisions.

In M&A, there are 1000 problems from formulating a deal to closing and fully integrating. So on any given day, you will have many different problems. You need to quickly structure those challenges or problems, and get them to a conclusion soon before the next problem comes up. 

You need to be able to listen to your stakeholders, synthesize their inputs, and then structure the discussion and frame their options. Get them to converge on a decision, otherwise, you’ll never solve all these problems. 

Zooming in and out of deals

In bigger corporations, there are many M&A leads and each lead handles a project differently. Some people only want to handle upper-level management. Some people, like me, handle both upper and lower-level management. And if you’re going to do this, you need to be hands-on. 

For example, as a deal lead, you may need to open an excel and distribute retention bonuses. Your HR partner will help you to some degree, but since you know where the boundaries are and the employees on the other side, HR will need your input to drive the appropriate retention bonuses. 

After going down to the detail, you now need to be able to get approval from the management side, which requires zooming out on a high level. 

Zooming in to create value

Here’s one example of zooming in. Let’s say one of the big deal pieces you’re working on are product integrations for software. You go through due diligence, and you have your technical partner look at the quality of the codes, look into the details regarding the risks of the product, and have them frame what they want to do with the product. 

So if the deal thesis hinges on product strategy, you have to frame and drive the discussion around what you want to do with the product. You could bundle it with an existing product. It could be a tiered product with a bronze, silver or gold offering. The product can also be offered as a substitute or cannibalize the existing product.

Those kinds of detailed discussions and driving it with your technical partner are examples of how you zoom in. Rather than owning the deal, where you just worry about the transitions. You zoom in on the deal thesis and ensure a good alignment with the transactions.

Pre LOI

During the pre-LOI, you should be able to zoom in on some level. In the example on the product side, you need to zoom in on the product demo, where you can see the product in person. Then, you need to have your technical person look into it and ask the following questions:

• Is the product something we’re interested in?
• Is this totally different from being compatible with our core offerings?

Now obviously, during the post-LOI, you can see more details. You can do more diligence. You can see how compatible it is with your offerings and how you are going to handle it. 

In the background, you’re also driving the discussion of the technical work needed to adjust certain things. More importantly, you need to validate your deal thesis and integration strategies from the beginning. 

Validating the integration plan

Time is of the essence in M&A. As soon as you kick off the diligence process, integration leads must already be involved and everyone has to be aligned on the most important part of the deal. Otherwise, diligence can go all over the place. 

So as a deal leads, you have to frame it and focus the team on the few items that are relevant to the deal thesis. The majority of your M&A team is not full-timers and has a day job. So you have to help them focus on where you want the diligence to focus on. 

Conducting diligence and integration planning

Conducting diligence and integration planning varies from company to company. 

My personal preference is to have most, if not all, of the diligence team should be the integration team post-close, although this is not always possible due to resource limitations. But if you can get most of them, then whatever they discover in the diligence process can be translated to integration actions in real time. 

For most companies, involve the integration team during the diligence phase to avoid a disconnect between the two teams, which can slow down the transaction’s value creation. 

If two teams did diligence and integrations, the risk assessment and mitigation execution could be off. 

When there’s a disconnect, it will take longer to achieve efficiency. In some cases, it could also hinder deal synergies. 

As the deal lead, I’ve done some integration in the past so I can see the importance of the integration. The transaction and the integration are all critical. But integration is hard, so you need to make sure that the integration team is well aligned as early as possible. Another crucial part of value creation is identifying the appropriate technical lead. 

Decision-making framework 

My personal framework for driving a problem to a conclusion is to listen, synthesize, formulate, and then converge. To accomplish this, you need to do the following steps.

1. Listen - The first step is to listen to the stakeholders' discoveries, whether during target engagement or the due diligence process. Allow them to explain their findings in their own words.

2. Synthesize - Analyze and understand what their findings mean and how the findings affect the entire deal. 

3. Formulate / Framing - Work with the stakeholder and develop a plan to handle the situation. Keep in mind that they are the experts in their field and may have initial thoughts about how to proceed. 

The goal is to provide options, help them see things more clearly, and validate their plan. The goal is to help them formulate options to handle a given situation.

4. Converge - Facilitate the discussion among stakeholders to converge to the best course of action based on the previously formulated options.

Feedback loop

Creating a feedback loop is a combination of bottom-up and top-down approaches. You have to have a consistent dialogue with the upper management side regarding the outcome. As for the bottom-up approach, you have one-on-one meetings with your colleagues.

Doing so will get you feedback or top-down guidance. This becomes a constant loop throughout the deal formation and execution. This is the same for integration, too.

To gather feedback, you first need to understand the different styles of each upper management. 

My business knowledge management style is to ensure I go into a meeting with a clear understanding of what I hope to get from it. Here are the things I usually look out for:

• What is the situation
• Options/solutions that the team is considering
• Suggestions/recommendations from the management

This is to ensure that we get a decision or action item after each meeting. Give people time to discuss an open dialogue, but you have to own the meeting and frame it to reach a conclusion or feedback.

Keep in mind that these upper management teams have 10 to 15 meetings daily and acquisitions could be just one of them. So you need to remind them what you talked about last time, what we learned, and what are the options. 

Transparency as culture

It’s more of a cultural thing to be disciplined in driving the meetings. It’s not formalized as to how many minutes you spend on it. But I always structure it in a way that it’s meaningful so that everyone is focused.

Inform them of the situation and discuss possible options. Toward the end, you must assess what option we are all leaning into or if we need more information before making a final decision. 

Since you must make many decisions before successfully converting a deal, you need to solve them immediately. Or else, problems will overlap, and you’ll never reach the end goal. Therefore, you need to be efficient in solving one problem at a time or consecutively.

Teaching the culture

In most large corporations, business units have subcultures. With this in mind, a particular approach suitable to one business unit may not apply to another. 

Bigger corporations tend to have an established M&A team and IMO (Integration Management Office). As a result, they have established processes and frameworks. But, at the same time, they have to be flexible when partnering with different business units, general managers or stakeholders.

The only thing that you can be disciplined about is your own framework of driving solutions. Some people don’t like to be told about processes but, as an M&A lead, you need to have a framework that drives solutions. 

Remember, the goal is not to get everyone to follow processes. The goal is to solve problems and to get things done by solving challenges from the deal formulation up to its closing. - Andy Wijaya

Working with both teams

It’s a balancing act. In essence, you have the acquiring business unit trying to decide by learning as much as possible. On the other hand, the selling business is trying to get the transaction as robust as possible. So you have to balance things out. How do you drive the transaction and learn as much as possible to make the right decisions? 

In any learning throughout the entire process, during the engagement with the target, pre-LOI, due diligence and towards closing, you can put them in three buckets. 

1. Problems that solves itself. Once you learn it, it becomes clear what you need to do. 
2. Risks that has no perfect or complete solution. You need to come up with a mitigation plan.  
3. Showstoppers. Things that you can do anything about them.

You must balance by assessing everything on the business side and accommodating these learnings to the other side.

Ownership 

It’s good to have clear ownership to drive accountabilities. In the diligence kickoff, you must be clear about the owner of a given function. Whenever there is an inter-functional problem, you must identify who should make the right calls. 

Aside from driving accountabilities, taking ownership allows for the problem to be quickly solved. You don’t want multiple functions focusing on a problem and having no clear idea of who’s supposed to drive it toward a resolution. 

In my experience, putting multiple people in one box or having one person report to multiple people creates a conflict of interest. It does not incentivize them in the right direction. So, having a single responsible owner or a focal person to report to avoids any duplication.

M&A is one of those projects where having 20 to 50 team members is common. Having too many cooks in the kitchen is possible. This is why you need to have a meeting or a one-on-one smaller group discussion to address any challenge or problem as the deal leads. 

If you keep addressing problems in a larger setting, you can never converge because there are too many people. 

In M&A, most of the human resources are not full-time M&A professionals. As a deal lead, your job is to drive alignment toward them because M&A may not be their top priority. You must set them aside for a smaller group discussion so their ownership becomes clear.