Strategies for Developing sound M&A processes
• Get the right people involved
• Make sure your experts are taking the time to teach others
• Communication is key
• Expect Resistance
• Technology can help
• Consider Outside Assistance
The outcomes, however, are well worth the behind the scenes grunt work, especially for larger ($50M+) deals. Most C-suite executives turn to mergers and acquisitions to jump-start growth or for financial gain, but without these clear systems in place deals often (70% of the time) fail - whether during negotiation, diligence, or integration.
More specifically, the following deal dangers begin to come into play without the establishment of processes:
Although each deal brings with it its own unique circumstance, having a standard process that can be modified for each deal is of the utmost importance for buyers.
Here are some strategies for developing and instituting sound M&A processes:
The best people need to be immersed in the various stages of M&A, and although the best people are often the busiest, the benefits their involvement yield more than compensate for their time. To truly develop successful processes you need a dedicated team of experts. This will allow your company to develop skill-sets in the different areas of M&A.
Additionally, getting the right people involved early in the M&A process helps avoid information gaps and overlapping and redundant work during diligence. Similarly, data shows that having the right people involved from the inception of a deal leads to a smoother and, ultimately, more successful post merger integration.
While you want your experts involved, the experts cannot be the only ones with valuable knowledge; therefore, it is worthwhile for your key players to have others shadow them so the process can continue under all circumstances.
The process cannot be “standard” if it ends when an important player retires, works on another deal, or focuses on other critical business issues.
As with all aspects of deal-making, communication is of the utmost importance. When developing M&A practices and systems, clear communication avenues need to be a priority. For example, all stakeholders need to be talking regarding post-deal integration even at the start of diligence. In addition, Corporate Development teams must be communicating with Integration teams. Finally, individual work streams need to have a way to communicate with each other to avoid the all too common problem of working in isolating silos.
Best practices would entail providing a big-picture view of the processes for all parties (technology can help provide this) and stakeholders. In addition, techniques such as daily or weekly stand-ups (brief) and reporting up can create powerful and useful lines of communication.
Most experts and executives on the front lines of M&A agree when any new system comes into play, some employees, already busy with their day to day work, will be resistant to change.
More specifically, the resistance stems from having to learn a new process when people are already so busy. Executives need to be cognizant of this and understand these feelings, while simultaneously conveying the notion that a robust process will ultimately save time and money and extract the highest level of deal value.
Establishing processes can be supported by M&A project management platforms. Platforms such as DealRoom allow for a bird’s-eye view of the work all stakeholders are doing, which eliminates duplicate requests/tasks, creates transparency, and ups efficiency.
It should be noted, however, here again executives run into the potential pitfall of employees being resistant to learning another new piece of technology. We have all seen the push-back against the time it takes to learn a new tool. Consequently, it is essential for executives to select not only the best platform for M&A, but also a platform that is user-friendly and intuitive.
Finally, outside support, such as M&A consultants and/or education, can be a worthy investment when more immature teams are trying to establish long-term processes for discovery, diligence, or integration. Of course, you want to consider the background of the consultant and how he/she can specifically fit your niche. Once you have your process in place, remember to be flexible as each situation brings its own circumstances and nuances.
With a proven process in place, no matter the circumstances, you can insure you will be moving in the right direction and working efficiently to not only close deals, but also to maximize their value.