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The Impact of Agile on Company Culture and Deal Speed

Practitioner Perspective: How culture plays a role in deal speed and how Agile methodologies can, once again, help.

Overview:

• Bank and finance

• Legal

• Corporate Development

Culture Role in Deal Speed from a Practitioner’s Perspective

While many factors contribute to deal speed and efficiency, top M&A practitioners note culture clashes often hurt deal speed and lead to discord among stakeholders.

Moving to a more Agile approach, therefore, can not only improve deal speed, but also improve the working relationships between stakeholders.

Here are suggestions from M&A practitioners at Fortune 500 companies regarding how specific stakeholders can apply Agile principles to their toolboxes in order to be more efficient and boost deal speed:

Agile methodologies for investment banks

1. Bank and finance

There is often friction between bankers and M&A teams because bank culture has historically focused on all the details relating to a deal during diligence before moving forward.

Successful, Agile-based M&A teams, on the other hand, have begun to realize that when it comes to deals, everything cannot be done all at once. With this in mind, Agile practitioners focus on smaller tasks that have been prioritized.

This approach allows for fewer roadblocks because information can flow between the bankers and Corporate Development teams much faster, which means workloads can become balanced - team members are not waiting for the bankers to get back to them, then suddenly becoming slammed with work when the bankers do.

This also means work related to the deal never comes to a complete standstill.

By learning to “chunk” their work and focus on a few key tasks rather than on all the details, bankers will benefit as well by reducing excess work.

Specifically, sometimes deals really do not need every single question on “the list” answered before moving forward (in fact, 20-40% of requests are usually not reviewed); giving M&A teams the information that is truly needed to move the deal to the next task, and not more, will free up bankers’ time and make for a smoother working relationship with practitioners.

legal teams benefiting from Agile methodologies

2. Legal

Similarly, Corp Dev teams note that the Legal arena tends to operate like that of the banking culture.

Again, the emphasis is often put on covering all of the bases upfront, but really some of the information gaps and tasks could be addressed later in the process without compromising the deal’s value.

Lawyers and legal analysts working with M&A teams could improve deal speed and limit wasted time and energy by thinking of deals more in terms of sprints and delivering only key information necessary to reach the next step in the deal.

corporate development uses Agile methodologies

3. Corporate Development

Historically, there has been a trend of secretively when it comes to large corporations and their M&A deals and strategies.

However, more and more Corporate Development teams are realizing the fundamental methodologies of M&A are somewhat universal and can be better adapted and applied through education and honest conversations with expert practitioners.

Agile methodologies are really universal practices that can be organically implemented to improve M&A processes in the world of technology, healthcare, retail...the list goes on.

One struggle for Corp Dev teams that has long gone unaddressed is that their multiple work streams often use different tools.

Addressing this issue by centralizing work tools can greatly improve M&A practices and lead to smoother integrations.

Agile can be Applied to Many Different Company Cultures

Many M&A experts have explored how company culture can affect deals, for example retailers tend to move quickly, while more academic-style corporations are known for taking their time; however, very few of these experts have explored the complex relationships between stakeholders.

Ultimately, stakeholders need to examine their work cultures and be open to adopting new methodologies.

Moving away from a predetermined plan or chain of events and becoming more flexible, adaptive to change, and small-task oriented will help all stakeholders navigate the waters of M&A more effectively,  saving both time and energy...and ultimately, money.

These Agile approaches will also boost communication between stakeholders and build stronger, more balanced, working relationships.

What Causes Deal Fever? What Raises the Risk?

There are several symptoms that can lead to the disease of deal fever. 

One such symptom of deal fever is getting carried away in the heat of the deal. There is a lot of time and effort spent just exploring a potential deal, let along the negotiations involved. Sometimes people spend so much time and effort on exploring and negotiating the deal that they feel is must get done at all costs, while failing to take a birds-eye view in determining if the deal is really the best thing for the company.

Another symptom indicating the presence of deal fever and one that raises the risk of catching it is when certain executives become more excited about the deal and emotionally involved in the outcome than other members of the group. This can lead to inflating the deal’s potential strengths instead of also focusing on potential pitfalls. In a competitive situation, sometimes certain people want to do the deal much more than others for a variety of reasons. 

Many M&A teams also use M&A software to help them source new deals. Just because a software is telling you a deal is a good idea, that doesn't mean you don't have to do the proper research.

How to Prevent Deal Fever

Great news! There are a number of proven ways to prevent deal fever and keep your company disease-free. Here are some tips to stay deal fever-free:

  • Perform More Research Than You Need To. You can never perform too much research on a potential deal, so we recommend doing even more than you think you need to.  
  • Seek The Opinion Of Experienced Deal Makers. Get another opinion from someone you trust that has embarked on similar deals. What do they think of the deal? Seeking another opinion that can evaluate your potential deal without the emotional involvement will help you ensure the deal is truly one you want to pursue!
  • Know All Of The Potential Risks. Thoroughly evaluating the deal’s potential risks, and involving your team in the process, will help you avoid deal fever. Don’t lose sight of your basic financial calculations! Involving others in the process is essential, as you want to make sure nothing is overlooked and you can remain deal fever-free. 

Resist deal fever by not overlooking the negatives that you may not want to see! If you have been the primary person working on the deal, make sure you involve others so they can help assure that you are seeing everything clearly. There should never be one person working on deal flow tracking. Likewise, don’t let personal pressures to get the deal done get in the way of looking at everything objectively. Sometimes, not doing the deal may be in the best interests of the company.

How to Tell When You Have Deal Fever

Do you have a high degree of risk tolerance? Do you have a burning desire to get the deal done, yet something just doesn’t feel right about it but you’re not sure what? If so, you may be catching a slight bout of deal fever.

Having the above feelings isn’t just exclusive to individuals, either. Many companies surveyed believe that their M&A function of getting the deal done is more important than what follows. If you’re in the M&A department, and you’re not performing M&A’s, something must be wrong, right? No, not necessarily. Inherently good deals are difficult to come by and you may have to pass on many of them before you find the right fit.

If deals contain personal agendas or emotions, or your company provides more incentives and encouragement to do the deals rather than not, than these are signs that your company may have deal fever. Recognize the signs so you can avoid deal fever and ensure you are making deals that have the highest chances of future success for your company.

Deal Fever

Treatment, Care & Medications For Deal Fever

Below are some treatment, care and medications for this contagious disease known as deal fever:

  • Treatment Option 1. Ensure your deal team is incentivized for long term success, and not just for completion of the deal.
  • Treatment Option 2. Have objective, experienced observers review the deal specs, including all of the potential negatives of doing the deal.  This way you can help ensure you’re not overlooking potential pitfalls.
  • Treatment Option 3. Let post-close executives have direct input into whether or not the deal goes through
  • Medications For Deal Fever. Create clear action steps that are to be taken when considering all potential deals. Create a set of red flags, or things to be looked at more closely when they occur. Finally, a healthy dose of objective observation by people not directly involved in the process will both help prevent and cure this debilitating disease!

A very important aspect in our guide on deal fever is to cultivate a business culture in which you have both risk tolerant and risk averse individuals on the team, with both groups having equal say. When both groups sign off on a potential deal, and it is also reviewed by an objective observer, you know you might have a winner!

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Don’t Underestimate the Power of Diet, Exercise & Rest

One of the most important ways to prevent deal fever that is often overlooked is to ensure you have a good diet, and are getting enough exercise and rest. Doing so will keep your mind and body in tip top shape, and will help alleviate some of the pressures incurred from pursuing and evaluating a potential deal. 

M&A deals are complex transactions that often go at a very fast pace and can also be emotionally charged, so ensuring you’re eating well, exercising and getting enough rest can help counteract the pressures of working on the deal.

The Takeaway

Many M&A management can sometimes lack a truly accountable leader to oversee the process. Having a great leader, coupled with the goal of long term success instead of short term, are the highlights of the best things to do to not get infected with this crippling disease. Set the criteria for success and focus on that more than focusing on doing the deal just to get it over with. Make sure your team is incentivized on long term goals and are not acting out of the fear of “what if we don’t get this deal done.”

If you and your team are currently managing M&A transactions, check out DealRoom's M&A virtual data room and project management software. DealRoom's platform also includes pipeline and integration management, which helps teams organize deals for their entire lifecycle.

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