by Tom Allen
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The ninety-hour work week is the norm for many M&A teams. While many accept this as industry standard, it doesn’t have to be. Smart companies are doing M&A differently. They’re assessing more targets and extracting more value in a fraction of the time. But it doesn’t happen by doing more of the same.
Business environments are getting more competitive. Traditional models and means of growth are shifting as agile startups, innovative technology and cheap financing give rise to disruption. Digital technologies have brought a renaissance; company urgency to find scope and scale, to innovate rapidly and win on new, competitive fronts is forcing a M&A surge. For the M&A Executive, Deal Lead or Project Associate, what this means practically is the expectation to do more, more successfully, in less time. It means more hours, fewer weekends.
While the M&A priority heightens the demands on corporate deal teams, to think that it necessarily means entering the realms of triple-digit work weeks undervalues the impact that platform technology, process repeatability and investment in strategic alignment can offer.
Midaxo has unearthed insights from working with dozens of top acquirers, representing all major industries. For deal teams, these insights restore clarity, efficiency and effectiveness. Together they amount to fewer hours and more value. This is attractive to the CEO with investors breathing down his neck, to the M&A executive dealing with integration pressure and a burned-out team, and to the project analyst who hasn’t seen a Saturday night out with friends in months.
These insights represent a broad range: from the practical and immediately implementable, to the cultural. Each, however, are doable and modeled daily by the most successful corporate acquirers.
Get Back Your Weekends By:
Determining Strategic Objectives
Findings from McKinsey offer a roadmap for how companies should execute M&A to improve the odds of success. Foremost, is that the most successful acquirers use deal making to support existing strategy, not as a strategy in and of itself. The difference is subtle, but significant. M&A needs to complement, extend or enhance an existing set of corporate objectives or business plan drivers. Only when these are clear can M&A be deployed to address company goals. In short, buyers need to have a smart acquisition strategy.
Consider the obvious implications of deal making that is disconnected to an overarching “why”. First, the playing field is too broad. Pipeline targets cannot be reasonably sought, pursued and vetted. With no or few filters, everything is in scope. Naturally, this kills downstream effectiveness too, as due diligence is performed too thinly across too many targets. Hours are spent outlining business case rationalization, covering impossibly wide value scenarios because there isn’t a set agenda on where the existing business portfolio lacks, where new geographic reach is needed or where R&D limitations exist. As the saying goes, when everything becomes priority, nothing actually is.
Qualifying a “yes” takes work on the executive front to align strategy and M&A objectives, but it delivers massive time benefit and ultimately safeguards an acquirer from chaotic, scattered and disconnected deals. Integration synergies are difficult to track and manage across unrelated acquisitions too, and business units cannot be reasonably expected to partner in finding and absorbing new technologies and targets.
IBM, having made more than 170 acquisitions since 2000, understands the helpfulness of self-imposed strategic limitations. Bain reports that the company’s business development office is tasked to ensure a strong, ongoing connection between its deals and strategic decision making. The office starts with three critical questions about each target:
Does it build or extend a capability we already have?
Does it have scalable intellectual property?
Can it take advantage of our reach into 170 countries?
While there isn’t a tried-and-true formula as to what constitutes a strategic connection, having a “why” lens frees up teams instantly. Reducing unnecessary work is always better than simply becoming more efficient at doing the wrong work.
In an earlier article, we offered examples of top questions companies use to hone acquisition strategy and goal connection. Some favorites include:
- What products/technology requirements does our road map require?
- How much risk are we willing to take – what is acceptable to shareholders and stakeholders?
- What gaps do we have in our human capital or talent resources?
- Are we prepared to invest in pre-revenue/early-stage companies?
- What geographies do we want to operate in? (Related: what are our specific international market preferences?)
- What level of funding is readily available? What level of additional funding could be obtained, if necessary?
For an M&A leader trying to shift an ad-hoc M&A culture, coach executives to remember that M&A is an extension of the corporate growth agenda. Push for clarification on a guiding strategy and a clear, logical basis for how you and the team will identify targets and create value.
Once leaders can easily answer why a M&A campaign is being pursued and how it aligns with overall corporate strategy, it is time for the battlefront against hundred hour work weeks to shift.
Get Back Your Weekends By:
Building Repeatable Processes
Leading consultancy Oliver Wyman suggests that M&A should not be “episodic”. What this means is that M&A works most effectively when an organization commits to regular deal-making based on a pre-defined strategy and, most importantly, captures lessons learned from each deal to continually reinforce, standardize and build its processes and capabilities. Intelligent, value-added and time-saving M&A requires this. People and processes improve to the degree that the success factors and common tasks associated with most deals are codified.
Of course, companies should not overreact and systematize every aspect of M&A and rigidly apply or deploy ready-made checklists for every step in the identification, due diligence and integration phases. Consultancy West Monroe Partners advises companies to “include research, context, tools and templates in your playbook. Articulate the goals of the transaction up front and then give teams guidelines on how and when to use the playbook to support those goals. Don’t create dense content that users can’t digest. If they don’t understand it or it is too cumbersome, they won’t use it.”
The point is flexibility and intuition must be embraced alongside rigor and comprehensiveness. Fortunately, building efficiency in other deal facets and having a strong contextual understanding of a deal “why” allows the time and space for deal teams to operate dynamically – and not fall into the trap of following a roadmap mindlessly. When teams are stuck, heads down, moving a deal in an ad-hoc fashion without a guiding sense of the deal’s purpose, critical thinking is restricted. This may create unnecessary work on the deal backend by not factoring in integration or other process implications in earlier planning.
M&A playbooks cover detailed guidance notes, checklist items and supporting templates spanning the entire M&A lifecycle – from developing an initial strategy and appraising target companies, to displaying initiatives on post-merger integration (PMI) and long term value capture. While building a playbook from scratch may seem hopelessly complex (a robust playbook can take hundreds of hours to draft and refine) take heart – many companies build them component by component by just being more cognizant during a transaction and capturing steps systematically as they get done. Even if a company has a track record of being free-flowing during deals, interested team members can agree to document the critical tasks they’re managing in the various stages during a deal, or use non-transaction down time to organize tasks. Very quickly, a reasonably well-architected playbook of learnings can be constructed and turned into a “templatized” version.
In describing how to kickstart repeatable M&A, Midaxo’s CEO Ari Salonen, offered this encouragement after having seen companies start down this developmental path:
“In looking to establish an M&A process, it’s important to start with the basics and add detail gradually. A common mistake is to “copy and paste” a sophisticated best practice [process or template] and attempt to layer it upon your organization. While the process might look great on paper, in reality there are likely to be too many steps and concepts to follow – many of which will feel foreign. Indeed, you may feel like you are just following process steps rather than focusing on what is most relevant and important to the deal.”
A best practice is to start by creating templates and checklists for key, known deliverables. Include bulleted lists of recommended areas for review, add tasks within the template and offer role or team assignments to begin organizing the workflow plan. The process isn’t highly disruptive, nor will it feel like a bureaucratic exercise of just adding something external, unhelpful and unrelated to an already jam-packed schedule. To guide thinking about key playbook components, consider the typical approval phases and standard deliverables for each in the above image. Teams can swap in or out phases and deliverables to fit their unique approach. To guide the development of an actionable playbook, see Midaxo’s growing library of due diligence playbooks and post-merger integration playbooks.
Get Back Your Weekends By:
Adding an M&A Technology Platform
A last, critical step to take back the weekend is applying intelligent technology to the transaction experience. The "analogue" approach of running deals from the email inbox is quickly declining. This approach to deal management is messy, insecure and ravenously consumes man hours. Disparate spreadsheet management, version control navigation, task management, and status consolidating and manual reporting must give way to a smarter, faster and more secure approach. By leveraging an end-to-end M&A software solution that manages the deal lifecycle, teams can enjoy the time-saving benefits of centralized, automated platform technology. Whether ingesting information, analyzing or visualizing metrics on a real-time dashboard, assigning and following up on action items or – and possibly most attractive to overworked deal professionals – driving automation of reporting and status syncs, a Smart M&A Platform becomes a critical hub for deal facilitation.
Even the M&A playbook, when uploaded and digitized within a Smart M&A Platform, takes on a new meaning as a more powerful project management tool. It comes to life - offering real-time visibility, self-service drill down capability, document or resource sharing and provisions for collaboration with internal and external stakeholders.
Putting a deal lead or project manager at the center of the deal process is burdensome. An individual cannot effectively juggle inorganic processes, project manage effectively, communicate timely and be expected to apply intelligence and intuition to extract deal value and find deal synergies. Simply, the volume of administrative work forces out the reasonable application of intellect. Yet, this is how many M&A deals generally work and sub-par deal teams run. When the human bottleneck gets alleviated through deal management software, work can be effectively managed and the time from deal origination to close expedited.
M&A will continue to be a key growth outlet for companies across all sectors globally. Those who take a thoughtful approach – who stop, review and consider how to trade hours for effectiveness, will find themselves forging ahead. Their deal teams, executive leaders, project managers and business unit partners will work more cohesively, more intelligently and be poised to source and secure high value targets more quickly and with lower risk. In the rapidly advancing world of M&A, fine-tuned means repeatable and extensible.
Looking forward, M&A and M&A technology will become even more of a differentiator that help companies break away from the competition. They become this not because of some panacea technology or process, but because the people driving deals are freed up to do their jobs with energy, passion, collaboration and with instinct. And, they get to enjoy their Saturday nights too.