by Tom Allen
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In M&A, successful deal outcomes hinge on the ability to prospect well then start, sustain and repeat a cycle of deal steps. Companies with track records of M&A-led growth do this exceptionally well. The success is no accident; it's built through a well-defined, repeatable and systematic internal processes.
Coined the “virtuous cycle of M&A repeatability”, the idea is that M&A capability is built around repeatable steps within strategy, deal thesis planning, due diligence, post-merger integration and execution. By establishing and maturing an M&A framework, companies can move seamlessly throughout the deal cycle – improving efficiencies and increasing the likelihood of success. This success is evidenced by more value per deal and a shorter time-frame to synergy capture. Companies taking this approach are also able to run more deals in parallel than their peers.
Successful companies don’t simply document the stages and steps, they test their processes and enhance these with M&A software so they can be easily followed and replicated. For these companies, internal deal-making environments support – and actually accelerate – growth ambitions.
As the New Year gets underway, now is a perfect time to assess the current reality of your M&A process. Ask yourself: "How are we trending and where will our M&A process be one year from now?"
Don't leave your M&A process to destiny - take action now.
Transforming M&A capabilities first requires a baseline assessment of where processes stand. To enable this, Midaxo recently launched the M&A Maturity Grader. This free online assessment delivers a custom, scored report covering key areas across the M&A deal life-cycle.
No matter the current state of process maturity, from non-existent to well-documented, there is opportunity to improve execution ability. Consider opportunities in the following deal phases:
General Process/Deal Preparation
While the potential of new technology, markets and products is alluring, when disconnected from a strategic plan and overriding objectives, M&A activity can easily be disordered, distracting and expensive. From the start, companies need clarity on business requirements, deal goals and return expectations. However, these cannot be pursued without plans, processes and tools that move these objectives to action.
General M&A deal preparation demands a documented acquisition strategy, project management steps and ownership assignment, file and data management, risk assessment protocols and cross-functional, departmental involvement. Consider these the rails on which successful M&A processes run.
Without a systematic approach, the chaos of M&A pipeline management strains even the most diligent deal teams. Responsible handling of targets and prospects demands a standardized approach to receiving, processing and moving deals through pipeline stages. Clear entry and output criteria, defined success factors, documented information flows and use of collaboration tools are a few of the best practices to establish. For companies burdened by a stalled and stale pipeline, consider what needs to change to better intake and decide on opportunities. Disordered processes, in particular, present a worthwhile place to start. These may include:
- Document storage. Have a dedicated folder for each deal and each stage. The ideal storage solution allows document sharing with stakeholders inside and outside the organization. It provides easy means to find supporting research for reports and presentations.
- Meeting productivity. Deal meetings should have defined intent, outcomes, agenda owners and participants. Establishing guidelines for how meetings will run and defining decision-maker roles builds easy communication flow, saves time and improves accountability.
- Issue/risk and task tracking. Tracking issues, risks and tasks through the prospecting, study, diligence, transaction and closing phases should be supported by pre-built, comprehensive templates and task lists. While deal subtleties may require some flexibility, template-based tracking delivers immediate benefit to execution ability.
A well-oiled M&A machine can significantly increase the efficiency of M&A efforts.
The purpose of due diligence is to increase the acquirer’s understanding of information supporting a transaction. This facilitates informed decisions, and serves to identify and mitigate key risks pre-deal. A well-managed M&A due diligence process means companies are equipped to answer questions within three distinct areas:
- Commercial and strategic rationale for the transaction
- Risk Reduction (and potential “deal breakers”)
- Deal Execution
Within each of these areas exist a significant number of questions. While companies may ultimately arrive at conclusions within these areas, the ease, repeatability and efficiency at which this is done can confer a competitive advantage. Questions related to everything from market attractiveness, competitive positioning and sector conditions, to valuation and HR compliance need attention. Measured improvement can come by standardizing approaches to tasks and activity assignment in the form of a due diligence checklist, referencing outside advisor engagement plans and using a secure, virtual data room storage solution. All of these improve the likelihood of deal success.
M&A efforts that outdistance the competition happen in the post-merger integration phase. Here, information transfer from the due diligence phase, paired with a clear understanding of target outcomes, helps companies unlock deal value. While there is no one-size-fits-all approach, successful PMI processes are well planned, aligned with deal objectives, measured, documented and organized for a merging of cultural, leadership, departmental and operational factors.
Often, however, general project planning and readiness within the PMI phase is inadequate. Proposed post-merger integration steps are disorganized, timelines are unclear, data is missing or inaccessible, collaboration is weak and accountability lacks. The disorganization not only wastes valuable time, it results in under-nurtured deal potential.
Today, consider if your current PMI process and post-merger integration checklist fosters integration success. Adopting the right tools and methodologies can transform a company’s ability to capture upside from deals. Midaxo’s M&A Maturity Grader can help score the maturity of your PMI phase. Additionally, the 62-page Guide to Post-Merger Integration outlines critical steps around closing, 100 Day Planning, communication, systems and controls, budget and planning, reporting and more.
M&A efforts that outdistance the competition happen in the post-merger integration phase.
Repeatability, clarity and predictability: these are the savvy M&A practitioner's New Year’s resolutions. Together, these elements bring efficiency to M&A efforts. By addressing the need for improved organization, step-by-step process development and a central deal management software tool for communication, file access and collaboration, a company can take the first steps towards a more mature M&A process and supercharge its future growth prospects.
As a new year of deal making gets underway, is your M&A process trending up? If the vision you see is a repeating loop of ad-hoc improvisation and disarray, now is the time for a M&A process upgrade.