Mergers and acquisitions are on the rise as companies look to speed growth and sharpen their competitive edge. Together, the improving economy, better access to capital, and attractive prices make this an auspicious time: Closing a good deal now can lay the foundation to super-accelerate later, when the economy hits full stride. Yet M&As are not a sure path to growth. In fact, as the Harvard Business Review reports, fewer than 30 percent of M&As succeed in delivering on their expected value. How can you ensure that your company’s next deal will be among them?
Point B's Perspective
Point B has helped to successfully integrate hundreds of acquired companies to realize their full value and deliver on the synergy that our clients saw from the start. It’s our experience that companies are successful when they focus not just on their ability to buy, but more importantly, on their readiness to own. This focus on readiness to own includes a thorough M&A methodology, a step-by step integration process tailored to the deal at hand, and the right people to execute the process across all functions and levels of the organization.
Start with a solid end-to-end M&A methodology
Focus on a small set of data elements—10 to 15 is best—and confine your efforts to one department or functional area to keep requirements crisp and avoid scope creep. Ideally, the elements you choose will have some impact on the enterprise.
Winning M&As are built on a methodology that provides a strong foundation for success in every phase of the M&A lifecycle.
A defined methodology enables organizations to be successful in all phases of the M&A lifecycle.
Long before successful companies choose a target acquisition, they have a clear acquisition strategy with agreed-upon objectives and priorities in line with their business strategy. They know their acquisition criteria before they ever enter a deal. And they have a rigorous due diligence process in place focused not only on the financials and legal aspects but the operational and technical elements to ensure the acquired company's value can be achieved. The defined strategy evaluates each target thoroughly, objectively and consistently against those criteria—assessing every deal through the same lens, with the same scrutiny.
To execute quickly and astutely after a deal has closed, winning companies have a detailed integration plan in place—a playbook that they can tailor to the deal at hand. (See the next section). They structure the integration like a program, with clear ownership, governance and processes for making decisions and resolving issues. Throughout the integration, they keep a close eye on all stakeholders—especially customers—building understanding and buy-in by communicating the benefits of the acquisition and encouraging involvement.
M&A methodology should also include plans to manage and protect the acquired company’s performance during and post-integration. This gives it the latitude to keep doing what it does best while gradually realizing the synergy that will come with integration. Knowing that synergy is not a switch that can be turned on the day the deal closes, M&A methodology includes measuring and evaluating outcome over a three- to five-year period.
Create a standard playbook that focuses on integration planning and execution
After a specific deal is in the making, a winning M&A gets tactical. Companies that plan to make multiple acquisitions can reap great value from having a standard playbook that lays out a set of instructions to guide the team through the entire M&A lifecycle. Developed as part of the M&A methodology, the playbook provides a consistent, repeatable process that details every step it takes to do a deal—including who needs to do what, and in what sequence, to stay on the critical path.
Your standard M&A playbook should give you the flexibility to tailor it, step by step, to the specific deal, based on such considerations as its size and complexity. A simple deal might allow you to skip 10 of your playbook’s 50 steps, or to spend less time on some of them. A large, complex deal may require you to devote more time and resources to a number of critical steps. Having a playbook that can be “flexed” to each acquisition eliminates the need to reinvent the wheel— saving valuable time, optimizing resources and giving you a detailed integration roadmap and timeline within a familiar framework.
Engage the right people in the right roles—and give them the support to succeed
After you’ve completed due diligence on a deal and tailored your playbook accordingly, you should have a good idea of the resources it will take to execute successfully. Underestimating resources is a common problem; so is pulling people into important roles without freeing them up from their full-time ”day jobs.” Avoid burnout and business disruption by giving people internal support, or bring in outside resources to backfill their day jobs so they’re able to focus on the integration.
When a deal is large and complex or includes a business model that is new to your organization, outside resources can quickly provide the scale and skill sets you need. Outside resources can also flex as your needs evolve. Consider outsourcing one-time standalone deliverables that are beyond your business’s normal activities (such as an install base migration). No need to build the in-house expertise for a one-time event when a skilled outside resources can manage it end-to-end.
The Bottom Line
As Shakespeare put it, “The readiness is all.” Some of the most important things you can do to ensure a winning M&A can and should happen before a specific deal is even in sight. Having a solid end-to-end methodology and a standard playbook in place will help you to recognize the right acquisition when you see it. When you do, you’re ready to move quickly to analyze the opportunity. And you have the business intelligence you’ll need to accomplish another important success factor: bringing together a winning team to ensure a successful integration.