by Kalle Kilpi
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Not too long ago, corporate development departments were focused almost exclusively on acquisitions. Now, these teams run a whole spectrum of deal types including corporate venturing, divestments, joint ventures, alliances and partnerships.
Additionally, companies have started to systematize key processes beyond the core deal sourcing, M&A due diligence and central integration management. Now, key value capture and risk mitigation processes, such as local integration management, employee on-boarding, legal entity rationalization and compliance are becoming well defined and systematized.
Emergence of venturing, divestments, licensing and partnerships
From tech to auto manufacturing, once strong and calm industries are facing disruptions like never before. These disrupting technologies and ideas, for the most part, are being developed by new platform companies and emerging start-ups.
This has triggered new approaches to corporate development. For example, major automotive companies are responding to disruptions like self-driving cars, carpooling, ride hailing, electric car technology and car sharing services with sophisticated corporate development programs utilizing various alternate structures.
Many of them recognize that it is really difficult to predict which early stage company will develop the best technology, such as artificial intelligence. Moreover, acquiring a small company too early might kill the innovativeness. So instead of acquiring, they choose to invest in many start-ups to secure access to those technologies and hedge their bets.
Another practice becoming increasingly common is when two top rivals form an alliance to jointly back a new technology or platform, with the hopes of it transforming into a standard in the industry. Often times, limiting the specific technology to a single acquirer’s brand would leave room for other technologies to gain wider adoption. Also, with the rapid pace of innovative technologies, once-attractive business units can quickly fall outside of the strategic focus, leading to divestitures and outsourcing deals.
Corporate Venture Capital
Emergence of local integration management, compliance, and systematized implementation processes
It is becoming increasingly clear to M&A-sophisticated organizations that the realization of the deal objectives depends greatly on the quality of execution immediately after the deal.
This comes down to things like guiding post-merger integration at every physical location, onboarding employees properly, training sales teams on cross-selling, ensuring regulatory compliance, securing IPR and quickly rationalizing legal entity structures.
|First wave of M&A systematization
Deal sourcing and management
Core post-merger project management
|Second wave of M&A systematization
Local integration management
Compliance and GDPR
Employee onboarding and training
Legal entity rationalization
For example, every mid-size to large company has multiple offices globally and, in some cases, dozens (if not thousands) of warehouses and retail locations. The grand plans for achieving synergies through things like cross-selling or rebranding is usually realized in practice by training employees or changing branding elements on the local level at each and every location. The disconnect between central planning and local level execution has been a major source of inefficiencies and frustrations in the past.
Furthermore, an M&A transaction triggers the need to merge legal entities, ensure compliance of the acquired company, handle litigations, better protect IPR, renegotiate contracts, dispose/acquire real estate, etc. These are areas where a lot of value is either created or missed out on.
Today, many companies excel at planning and completing the central PMI activities (largely due to careful systematization), only to see the field-level integration activities and various legal and HR processes executed poorly. The next wave is systematizing these key value creation and capture processes. We are already seeing it through our customers' use of Midaxo’s platform.
Midaxo is a cloud-based platform built for the complexities of M&A processes, especially those requiring the contribution of individuals across multiple teams and with sensitive information. Working with experts in corporate M&A, Legal, Investment Banking, and Management Consulting, Midaxo has put together dozens of M&A playbooks to assist teams of all sizes in strengthening their existing resources or getting started on a new process with confidence. To learn more, view our collection of playbooks here or contact a Midaxo representative today.