Michael Pazzani
Corporate mergers & acquisitions are possibly the most complex, unpredictable, and data heavy processes in the corporate sector. At one time in the past, Harvard Business Review reported that between 70% and 90% of mergers and acquisitions fail to meet projected results, while McKinsey & Company also reported that in any given year about 10% of all large mergers and acquisitions are abandoned.
Yet, when executed properly, the rewards of M&A can increase shareholder value significantly. If you are planning on acquiring a Company in 2021 as part of your overall growth strategy, here are 4 tips to keep in mind:
- Treat the M&A lifecycle as a wholistic process by bringing in the Corporate Development Team and Integration Team simultaneously. Historically, the Corporate Development team has focused on closing the transaction while the integration team is responsible for post-closing success. Essentially, treating an acquisition like two different projects carried out by different teams at different times. By introducing the integration team during the transaction phase with the Corporate Development Team, as opposed to after the transaction closes, meaningful relationships with inbound management and other inbound team members have the opportunity to be formed. Once the transition closes and reaches the integration phase these already developed relationships should help with team building and integration goal alignment. It also allows the integration team to shape conversations earlier, receive data sooner, and develop a clearer understanding of the goals of the transaction they’ll be responsible for achieving.
- Streamline the flow of information. The longer a transaction drags on the less likely it is to close. Closing a transition quickly requires many things to go right, some of which are controllable while others are not. One aspect that can be controlled is the speed and clarity of information flowing between the buyer and seller. At the very least, a centralized data room where information can be stored, accessed, and adjusted as necessary by the buyer and seller in real time is critical.
- Have a clearly defined acquisition strategy. An acquisition strategy is essentially the ultimate goal and strategic objective behind pursuing M&A initiatives, and should be defined before the search for a potential target company begins. A Company’s corporate development team should continually be scouting and screening targets that align with overall Company strategy and vision, whether it’s to expand the customer base, reduce costs, acquire talent or technology, or remove a competitor, among others.
- Know how you will ideally finance the purchase. Companies are typically purchased through equity or debt, or a combination of both. How the purchase is financed can significantly impact the economic returns of the transaction. Having a clear understanding of the capital structure impacts through forecasting outcomes is critical in understanding the impacts of these decisions.
when executed properly, the rewards of M&A can increase shareholder value significantly
Interested in learning more about how we can work together to create your M&A strategy in 2021? Reach out to us at info@scalehouse.consulting