by Tom Allen
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In the new world of technology-led M&A, demand for capable leaders is surging. Value-added deal making has moved from a tactical tool to an important institutional capability. Acquisition success and the application of acquired technology for growth is widening the gap between industry leaders and laggards. This means that agile leaders with a track-record of improving deals through technology, collaboration and process efficiencies are poised to shine.
Midaxo has identified four key Quarter One focus areas for the new M&A leader. By focusing on these, the leader will get up to speed faster, achieve more and set the stage for acquisition success.
1. Clarify Strategic Direction
The M&A leader plays a leading role in determining the department’s “true North”. When there is a transition of leadership, there exists a natural window to reassess strategic purpose and shift habits, responsibilities and vision where needed. This window is short, however - so in the first months of the role leaders need to clarify the strategic intent behind deal making. For many companies, success in M&A is elusive because there is a lack of broad acceptance around what drives deals. New leaders must push for executive-led communication of why M&A is being pursued, what constitutes an attractive target and what the desired results in the near and long term are.
Clarity here results in two things that separate successful M&A leaders from those that struggle: the ability to quickly say “no” and establishment of a smooth path to approval.
A strong “no” built on well-established outcome parameters, makes saying “yes” even easier. Only when a company knows what it wants, can it quickly assess targets and "kill" them to create space for ideal ones. Developing a target pipeline and commencing M&A due diligence without a strategic lens is a sure way to burn scarce resources, frustrate teams and potentially acquire a poor-fit target.
One third of respondents in a Wall Street Journal feature study indicated that they need six or more executives or committees to weigh in for deal approval. Fifteen percent admitted they need ten or more. The study’s author writes that:
“Time can be a deal killer, so the approval process should be geared to speed to close. M&A transactions cross multiple business, functions and geographies, creating a complex decision-making matrix can undo even deals with the strongest investment theses.”
In complex corporate environments especially, the path to approval becomes exceptionally difficult when the M&A leader must navigate business unit leader roadblocks and present a case to executives when the path is undefined or there is misinterpretation around acquisition strategy. Rather, they need to be able to point, with clarity, to an agreed upon strategy. In the same survey, 75% of respondents placed the same level of importance on providing clarity around the strategy of the deal as to a deal closing in a timely way.
With velocity and value becoming the M&A leader’s success benchmarks, departmental speed is essential with respect to individual actions and M&A pipeline management generally. Leaders must get their junior personnel and department staff moving rapidly, proactively and effectively. But often, these teams hesitate or get “stuck on go.” Hesitation is born from a lack of clarity. If teams don’t know what the target outcome is, they’ll second-guess activity and won’t be fully confident in what they are supposed to be doing - or of where they are supposed to be going. This impacts morale, drives attrition and, obviously, hurts deal effectiveness.
2. Prioritize Partnership Building
It’s easy for the new M&A leader to take an introspective stance and focus on the seemingly easy-wins of people or processes to strengthen the M&A department's contribution. Early priority must be given, however, to creating coalitions, growing stakeholder relationships and forming new partnerships across the company.
Deal success is elusive today, in part because capturing deal synergies is so complex and cross-organizationally involved. M&A leaders tend to lack the relational capital and alliances to meet aggressive integration timelines or uncover revenue and synergy opportunities (partly because so many M&A teams still work in a siloed manner). Those that do get “more bang for the buck” out of each deal.
Business units such as HR, technology, sales and legal will all be participatory in the deal making process, so it will prove beneficial to the M&A leader if they foster relationships with these units. This reduces silos and builds an understanding of their priorities, challenges and opportunities. Further, by involving others’ perspectives, consideration can be given pre-close to M&A diligence questions or synergy-capture opportunities that could help or hinder performance. Leaders with broad relationships reduce the potential for bad surprises and find pockets of value they might otherwise miss.
As referenced in Deloitte’s M&A Strategy Series research, bringing in perspective from functional leaders exposes cost-to-achieve realities that a M&A leader would likely overlook. The perspective of outside leadership can quickly expose oversight in initial financial assumptions or projections that can have a material impact on the assessment of performance.
3. Audit and Enhance Technology
At this level, the M&A leader bears the responsibility to manage projects throughout all stages of the transaction lifecycle. Accelerating this capability, while maintaining accuracy, prudence and efficiency is supported by having the right technology tools in place.
Many teams today – even those operating in emerging industries or targeting world-class digital disruption capabilities – operate with inferior technology. Within the first quarter of taking the role, the new M&A leader should review existing technology/tools and have longer-tenured personnel walk them through standard deal management steps. Thought should be given to how M&A technology is enabling, or inhibiting, the likelihood of deal success.
- Are digitized M&A playbooks the norm? Or are document templates, tasks and process checklists being manually stored, managed and updated?
- Is the process secure and compliant from a data management standpoint? Information security is the lifeblood of deal making. The leader needs to ensure that there are safeguards and ways to provision access to certain documents and data. Does the existing technology and policies have appropriate security controls and features such as an easily accessible user access history? Is data ownership, particularly in light of recent regulatory changes such as GDPR, managed in a compliant way?
- M&A teams tend to have one or more junior personnel engaged nearly full time on project reporting and providing status updates. As deal flow grows, more and more strategic resources get pulled into this. Top deal makers employ technology with automated one-click reporting functionality and on-demand, self-service status updates. Stakeholders can see the current state of a deal, outstanding issues/risks and what next steps are being pursued. Analogue tools are not only unhelpful as they require constant manual input, but are prone to delivering misinformation when parties access outdated document versions and make decisions accordingly.
- Project management effectiveness is sapped by outdated technology or processes that rely too heavily on untracked emails, calls and conversations. Utilizing a central platform where information is stored and shared, and where workflow actions steps are assigned reduces the administrative effort involved in a deal close. This is essential to rapid decision making, especially in an age where information volume is flowing at an unprecedented rate.
In its profile of today’s M&A Vice President leadership role, career and startup information site Cleverism writes, “As a departmental leader, he drives the development and enhancement of M&A methodologies and approaches within the department.”
This simple statement should not be misconstrued as simplistic. Enhancing department success is a clear priority and leveraging technology for speed and scale is a critical focus area, whether that's realized through M&A software or an alternate avenue.
4. Jump Start Process ‘Repeatability’
Early on, leaders may need to jump right into process restructuring. Many companies transact with loose, or entirely undefined processes. What this creates is a constant start and restart cycle. To be successful, acquirers need to develop an approach that is systematic, repeatable and extensible across all deal types; effectively a blueprint on how to progress a deal to close that is centrally embraced. Establishing a healthy M&A process is not the same thing as creating an overly sophisticated or complex one. Adding undue difficulty is a certain way to get teams to abandon the process and resort to moving things in an ad hoc way.
In early walkthroughs, the new M&A leader should ask the existing team to explain the deal approval phases, and for each, what deliverables exist. Introduce some consistency, or rework just a few aspects of the process initially – perhaps in an area where too many man hours are being spent. If, for example, the team delivers a HR due diligence report during the Due Diligence phase, ensure that this has been templatized, blessed by HR leadership and readily available for plug-and-play use thereafter. After the first deal closes, it is important to incorporate steps or success factors that were not included in the due diligence checklist and post-merger integration checklist, while also excluding ones that were not useful. This iterative approach and continual feedback loop helps firm-up existing processes and squeezes out waste. (For additional help see How to Establish a Winning M&A Process).
As a new M&A leader, your overriding goal in taking charge is to generate momentum. But to last, it needs to be built on the stable foundation of a strategy-centered, repeatable and collaborative approach to M&A. You need to mobilize people through partnership-driven connections, propel deals forward through technology-enhancement and design processes efficiently. Architecting all this isn’t easy, but it is made simpler through diligent application and a Smart M&A mindset.